The Design Linked Incentive, and the two benefits founders mix up
Nothing here is paid in advance. You fund the masks, the tools and the team yourself, then claim against milestones, and the gap is where chip plans break.
Summary
- Product DLI reimburses up to 50% of eligible design expenditure, capped at INR 15 crore, and only DPIIT-recognised startups and Udyam MSMEs can claim it.
- Deployment DLI is a different thing entirely: 4% to 6% of net sales of the deployed design over five years, capped at INR 30 crore, open to any domestic company.
- Both are reimbursements against milestones, so the working capital is yours until a claim clears. On crores of design spend, that float is the real constraint.
A semiconductor team came to us with a plan built on INR 30 crore of support and a design that was two years from tape-out. The INR 30 crore is real, and it belongs to the other half of the scheme, the half that pays on sales the company did not yet have. The half they qualified for was capped at INR 15 crore, and it paid after they had already spent.
That mix-up is common enough to be the reason this article exists. The Design Linked Incentive was notified in the Gazette on 21 December 2021, under the Semicon India Programme. It carries an outlay of INR 1,000 crore and is run by C-DAC as nodal agency under MeitY. It appears once in the grants and schemes register and pays in three quite separate ways.
Which of the incentives can you actually claim?
Start here, because the answer decides the number you are allowed to put in a plan.
The three fiscal benefits under the Design Linked Incentive scheme
| What it pays on | How much | Who can claim it |
|---|---|---|
| Eligible design expenditure (Product DLI) | Up to 50%, capped at INR 15 crore per application | DPIIT-recognised startups and Udyam-registered MSMEs only |
| Net sales of the deployed design (Deployment DLI) | 6% in years one and two, 5% in years three and four, 4% in year five, capped at INR 30 crore | Any domestic company, startups and MSMEs included |
| MPW fabrication and post-silicon validation | Reimbursement up to INR 30 lakh per application | DPIIT-recognised startups and Udyam-registered MSMEs only |
Domestic company has a specific meaning throughout: more than 50% owned by resident Indian citizens or Indian companies. You have to keep that ownership for three years after you claim, which is a covenant worth reading before a foreign round, not after one.
The Deployment incentive carries a condition the table cannot show. The design has to be deployed in electronic products. Cumulative net sales across the five years must reach INR 1 crore for a startup or MSME, and INR 5 crore for any other domestic company. That is a condition on getting paid each year, not a test you pass at application.
What counts as eligible design expenditure?
For the Product incentive, the guidelines list the heads they will reimburse.
- Scientific and technical manpower, capped at half of the approved incentive.
- R&D capital equipment bought for the design work.
- EDA and CAD tool licences, and IP licences, where C-DAC does not already provide them.
- IPR filing, both Indian and international.
- Field trials, silicon bring-up, test and characterization.
- Production, MPW and NRE costs, including mask and wafer charges.
Now the line that costs people money. Those costs are eligible only if they are incurred on or after the acknowledgement date of your application. Spend that predates the acknowledgement does not come back, however central it was to the design.
So the sequencing is the strategy. If you are close to committing to a mask set or a multi-year tool licence, the application comes first, and the commitment follows the acknowledgement. Teams that discover this in reverse lose the largest single item on their claim.
What does a reimbursement do to your cash?
A reimbursement is not funding in the sense most founders use the word. It is a refund of money you have already spent, released after somebody verifies that you spent it on what you said.
Under DLI, claims are filed once the relevant milestone or financial-year threshold is met, then verified by C-DAC, then paid through PFMS and direct benefit transfer. The cycle runs quarterly, half-yearly or annually depending on the category. At every point, the cash was yours first.
You are not being funded to design a chip. You are being refunded for a chip you already paid to design.
Price that gap properly. A design programme spending INR 20 crore over three years, claiming half of it back on milestones, is carrying crores of working capital for months at a time. The incentive improves the return on the programme, and it does nothing at all for the month you have to pay the foundry.
Two practical consequences. Your bridge finance, or debt has to cover the gross spend and not the net cost. And your claim discipline becomes a treasury function, because a rejected or delayed milestone claim is a cash event, not a paperwork one.
What does ChipIN access save you?
The part of the scheme that is not money at all is, for an early team, often the part that matters most. DPIIT-recognised startups and Udyam MSMEs get access through the ChipIN Centre to the national EDA tool grid, an IP core repository, MPW prototyping at foundries and post-silicon validation.
C-DAC's foundry and vendor tie-ups sit alongside it, including free access under the ARM flexible-startup programme. Tool licences and IP that you reach this way are not ones you buy, so they never become a claim, and never become a float either. The mechanics of the infrastructure are issued separately by C-DAC, so confirm the current process with them rather than from a summary.
How do you apply, and who reads it?
One application covers everything. You pick the support categories you are eligible for inside the same form.
- Register on the DLI portal at chips-dli.gov.in and pay the non-refundable registration fee of INR 10,000.
- Submit the online application with applicant details and a Detailed Project Report covering design, development and deployment, selecting the categories you qualify for.
- C-DAC screens and appraises on an ongoing basis, on eligibility, fit with the target segment and the threshold and ceiling limits, then issues an approval letter setting your milestones.
- File each claim after its milestone or financial-year threshold. C-DAC verifies, then payment is released through PFMS and direct benefit transfer.
The Detailed Project Report is the application. It is a technical and commercial document, reviewed by people who build chips. The deployment story matters as much as the design story, because one of the three benefits pays only on sales.
If you have not run a government application before, the seven stages a scheme application moves through will tell you where the time actually goes. On DLI the long stage is not selection. It is the claim cycle that follows it, and it lasts for years.
Is your team eligible before any of this?
Two gates, and one ambiguity worth knowing about.
The Product incentive, the MPW support and the ChipIN access are for DPIIT-recognised startups and Udyam-registered MSMEs. If you hold neither, the Deployment incentive on net sales is the only fiscal benefit open to you. Recognition is free and quick, and what it does and does not include is worth reading before you rely on it.
The ambiguity is in the guidelines themselves. Paragraph 2.1 restricts applicants to a private limited or public limited company, while the scheme's own startup and MSME definitions admit LLPs and partnerships. If that is your legal form, ask C-DAC where you stand before you build a plan on the answer you prefer.
So is this scheme worth the year it takes?
For a team already committed to a serious design programme, yes, and the maths is not close. Half of eligible design spend is a material change to a chip budget. The tool access can be worth as much again to a startup that cannot yet license everything it needs.
For a team deciding whether to start, no. The scheme refunds a programme you were going to run, which is a different question from whether to run one. The DLI register page carries the eligibility, benefits and process steps with the source behind each, and our grants and schemes work starts with the same reading.
Frequently asked questions
Can a startup claim both the Product and the Deployment incentive?
The application form lets you select the categories you are eligible for, and a DPIIT-recognised startup or Udyam MSME is eligible for both. They pay on different bases at different times: one against design spend on milestones, the other against net sales once the design is deployed and selling.
Is the DLI scheme still accepting applications?
The record we hold says the portal is live and C-DAC appraises on an ongoing basis, with the original three-year window from 1 January 2022 extended. A revamped version was reported to be under consideration during 2026, and nothing about it is confirmed, so check chips-dli.gov.in before you plan around either.
Does taking DLI stop me applying to other schemes?
No. The guidelines say DLI eligibility does not affect eligibility under other schemes, and you may file another DLI application once an earlier one has been approved, rejected or closed. Each of those other schemes still applies its own tests to you.
How soon after approval does money arrive?
That depends entirely on your milestones, because nothing is paid up front. A claim is filed after its milestone or financial-year threshold, verified by C-DAC, then disbursed quarterly, half-yearly or annually depending on the category. Plan your cash on the spending schedule, not the approval letter.
General guidance, current as at September 2026. Scheme ceilings, categories and windows change by notification, and C-DAC issues the operating detail separately. Check the register or the DLI portal before you act on anything here.
How useful was this article?
One tap. It tells us what to write more of.
About the author
Lead - Company Secretarial, Compliance & Fundraise Advisory
Everything Manavi has writtenLinkedInThe next one
Get what we publish next, by email.
Working notes on raising, borrowing, protecting, growing and structuring capital in India. One email a week at most, and you can leave any time.
We use your address only to send this. See our privacy policy.
We store your address to send you these emails and nothing else. See our privacy policy.
Related reading
