Deep Tech and AI Startup Grants: DSIR, BIRAC, and Government Schemes 2026

India allocated over ₹10,000 crore to AI and deep tech initiatives in the 2024-25 Union Budget, and the funding pipeline for 2026 is larger. Agencies like DSIR, BIRAC, MeitY, and DST now run dedicated grant programs for startups building foundational technologies in artificial intelligence, machine learning, semiconductors, quantum computing, and advanced robotics. A single deep tech startup can stack multiple grants, from ₹10 lakh under NIDHI-PRAYAS to ₹1.5 crore through iDEX, while claiming 100% weighted R&D tax deductions under Section 35(2AB). This guide covers every major government grant, tax benefit, and recognition scheme available to deep tech and AI startups in India in 2026, with exact amounts, eligibility criteria, and application steps.

What Are Deep Tech and AI Startups?

Deep tech startups are companies whose products or services are built on substantial scientific or engineering innovation rather than application-layer improvements. Unlike a SaaS company assembling existing APIs, a deep tech startup develops proprietary algorithms, custom hardware, novel materials, or fundamental research breakthroughs. The category includes artificial intelligence and machine learning, quantum computing, semiconductor and chip design, advanced robotics, genomics and synthetic biology, space technology, and clean energy solutions.

India's deep tech ecosystem has grown from fewer than 500 startups in 2018 to over 3,000 DPIIT-recognized deep tech ventures by 2025. Cities like Bengaluru, Hyderabad, Chennai, and Pune have emerged as deep tech hubs, with IIT and IISc alumni founding a significant share of these companies. The National Association of Software and Service Companies (NASSCOM) reported that Indian deep tech startups raised over ₹26,000 crore in total funding between 2019 and 2024.

What makes deep tech startups different from a funding perspective is the extended R&D cycle. A typical deep tech product needs 2 to 5 years of research before reaching market, compared to 6 to 12 months for an app-based startup. This gap is exactly what government grants are designed to fill: providing non-dilutive capital during the pre-revenue research phase when venture capitalists are reluctant to invest.

Government Ecosystem for Deep Tech Funding in India

The Indian government funds deep tech through a multi-agency structure, with each agency targeting a different stage of the startup lifecycle. Understanding which agency does what prevents you from applying to the wrong scheme and wasting months on ineligible applications.

The critical insight is that these schemes are stackable. A single deep tech startup can hold DPIIT recognition, receive BIRAC BIG for proof-of-concept, win an iDEX challenge for a defence application, and simultaneously claim Section 35(2AB) R&D deductions through DSIR recognition. Each scheme has independent eligibility criteria, and receiving one does not disqualify you from others.

DSIR Recognition: Eligibility, Process, and Benefits

The Department of Scientific and Industrial Research (DSIR) provides two key benefits to deep tech companies: recognition of your in-house R&D facility (which enables tax deductions under Section 35(2AB)) and registration as a Scientific and Industrial Research Organisation (SIRO). Both are administered through the dsir.gov.in portal.

Eligibility for DSIR R&D Recognition

• Entity type: Only companies registered under the Companies Act, 2013 are eligible. LLPs, partnerships, and proprietorships cannot apply
• R&D facility: You must have a dedicated, physically separate R&D unit with identifiable staff, equipment, and allocated budget
• R&D expenditure: The company must demonstrate ongoing R&D spending in its audited financial statements
• Innovation focus: R&D activities must aim to develop new products, processes, or technologies, not routine testing or quality control

Application Process

1. Register on the dsir.gov.in online portal and submit Form A with company details
2. Upload Certificate of Incorporation, Memorandum of Association, audited balance sheet, and R&D facility photographs
3. Provide a detailed write-up of R&D projects, including objectives, methodology, and expected outcomes
4. Submit list of R&D personnel with qualifications and their dedicated allocation to research activities
5. DSIR reviews the application and schedules a physical inspection of your R&D facility within 2 to 3 months
6. Post-inspection, DSIR issues recognition valid for 3 years (renewable upon re-application)

Benefits of DSIR Recognition

• Section 35(2AB) deduction: 100% weighted deduction on both capital and revenue R&D expenditure, directly reducing taxable income
• Customs duty exemption: Exemption on import of specified goods for R&D purposes under Notification No. 24/2002-Customs
• Excise duty exemption: On goods purchased from domestic suppliers specifically for R&D activities
• Technology Development Board (TDB) loans: Soft loans at concessional interest rates for commercializing indigenous technology

DSIR vs DPIIT Recognition: You Need Both

Many deep tech founders confuse DSIR with DPIIT Startup India recognition. They serve different purposes. DPIIT recognition certifies you as a startup and provides the 3-year Section 80-IAC tax holiday, self-certification for 9 labour and environmental laws, and access to SISFS and Fund of Funds. DSIR recognition certifies your R&D facility and provides the Section 35(2AB) weighted deduction plus customs exemptions. A deep tech startup holding both recognitions gets the tax holiday (first 3 years) plus the ongoing R&D deduction (every subsequent year), reducing effective tax liability by 60% to 80% during critical early operations.

BIRAC Funding Programs for Deep Tech and AI Startups

The Biotechnology Industry Research Assistance Council (BIRAC), under the Department of Biotechnology (DBT), is one of the most active government funders for deep tech startups in India. While originally focused on biotechnology, BIRAC has expanded its scope to include AI-driven healthcare, medical devices, diagnostics, synthetic biology, and computational biology. Since 2012, BIRAC has supported over 1,500 startups and entrepreneurs with cumulative funding exceeding ₹2,800 crore.

BIRAC BIG (Biotechnology Ignition Grant)

BIG is BIRAC's flagship program for early-stage innovators. It provides a non-dilutive grant of up to ₹50 lakh for 18 months to support proof-of-concept development. AI startups building solutions for drug discovery, genomics analysis, medical imaging diagnostics, or precision medicine are eligible. The selection process involves three rounds: online application screening, presentation to a national expert committee, and final approval by the BIRAC board. Applications open twice a year, typically in January and July.

SBIRI (Small Business Innovation Research Initiative)

SBIRI funds startups that have moved beyond proof-of-concept and need capital for product development. Phase I provides up to ₹50 lakh for concept validation over 12 months. Phase II provides up to ₹1 crore for product development and scale-up over 24 months. Unlike BIG, SBIRI is available only to registered companies (not individual innovators), making it the natural next step for deep tech startups that have exhausted their BIG grant.

BIPP (Biotechnology Industry Partnership Programme)

BIPP supports late-stage, high-risk R&D through cost-sharing partnerships. The government covers up to 50% of the project cost, with the company contributing the remaining 50%. Grant amounts can reach ₹5 crore or more for multi-year projects. BIPP is suited for deep tech companies that have validated their technology and need capital to complete clinical trials, regulatory submissions, or pilot manufacturing runs.

IndiaAI Mission and MeitY Schemes

The IndiaAI Mission, approved by the Union Cabinet in March 2024 with a budget of ₹10,372 crore, is the largest single government commitment to artificial intelligence in India's history. The mission has seven pillars designed to build AI infrastructure, develop talent, and fund application development across sectors.

IndiaAI Mission: Seven Pillars

• IndiaAI Compute Capacity: Building a network of 10,000+ GPU-powered computing resources accessible to startups at subsidized rates
• IndiaAI Innovation Centre: Developing and deploying foundational AI models in Indian languages and domain-specific applications
• IndiaAI Datasets Platform: Creating a unified platform for quality, non-personal datasets across agriculture, healthcare, and governance
• IndiaAI Application Development: Funding startups building AI solutions for healthcare, agriculture, education, and smart cities
• IndiaAI FutureSkills: Training 10,000 AI professionals through partnerships with IITs, IIITs, and private institutions
• IndiaAI Startup Financing: Direct funding to AI startups through a dedicated financing mechanism managed by the IndiaAI Mission office
• Safe and Trusted AI: Developing responsible AI frameworks, testing infrastructure, and audit mechanisms

MeitY TIDE 2.0 Scheme

TIDE 2.0 (Technology Incubation and Development of Entrepreneurs) provides financial support to startups working on emerging technologies through 51 Centres of Entrepreneurship (CoEs) across India. The scheme offers:

• EIR (Entrepreneur-in-Residence): Stipend of up to ₹7 lakh over 12 months for pre-incubation stage innovators
• Prototype funding: Up to ₹30 lakh per startup for prototype development and market validation
• Mentorship and lab access: Computing infrastructure, testing facilities, and industry mentor network access

AI startups working on natural language processing, computer vision, reinforcement learning, edge AI, and generative AI applications are all eligible under TIDE 2.0. Applications are routed through the nearest Centre of Entrepreneurship, and the list of active centres is available on the meity.gov.in website.

The IndiaAI Mission will also offer subsidized access to GPU clusters through empanelled cloud service providers. Deep tech startups currently spending ₹5 to ₹20 lakh per month on commercial cloud compute for model training can reduce costs by 40% to 60% through this program once it becomes fully operational in 2026.

Startup India Seed Fund Scheme (SISFS)

The Startup India Seed Fund Scheme is a ₹945 crore initiative providing early-stage funding to DPIIT-recognized startups through a network of approved incubators across India. For deep tech and AI startups, SISFS is often the first non-dilutive capital injection available after incorporation.

SISFS Grant and Loan Details

• Grant amount: Up to ₹20 lakh for proof-of-concept, prototype development, or product trials
• Loan amount: Up to ₹50 lakh for market entry, commercialization, or scaling (through convertible debentures or debt instruments)
• Disbursement: Funds are released through DPIIT-approved incubators, not directly to startups
• Duration: Grants cover 12 to 18 months of development activity

SISFS Eligibility Criteria

1. Startup must be DPIIT-recognized under the Startup India initiative
2. Entity must be a Private Limited Company, LLP, or registered partnership (not sole proprietorship)
3. Must not be older than 2 years at the time of application to the incubator
4. Must not have received combined government funding exceeding ₹10 lakh from any other central or state scheme
5. Must be using technology in its core product or service offering

Deep tech startups have a natural advantage in SISFS applications because the scheme prioritizes technology-driven innovation. Applications with filed patents, published research, or documented R&D processes score higher in incubator evaluations.

DST NIDHI Programs and Atal Innovation Mission Grants

The National Initiative for Developing and Harnessing Innovations (NIDHI) under the Department of Science and Technology (DST) and the Atal Innovation Mission (AIM) under NITI Aayog provide complementary funding for deep tech startups at different stages.

NIDHI-PRAYAS (Promoting and Accelerating Young and Aspiring Innovators)

PRAYAS provides up to ₹10 lakh per innovator for prototype development over 12 months. The program operates through 20+ PRAYAS centres at IITs, NITs, and research institutions. Applicants do not need a registered company; the grant is available to individual innovators with a technology idea. This makes PRAYAS ideal for researchers at universities or labs who want to validate a deep tech concept before incorporating a company.

NIDHI-EIR (Entrepreneur-in-Residence)

EIR offers a monthly stipend of up to ₹30,000 for 12 months to aspiring entrepreneurs exploring innovative business ideas at NIDHI-supported incubators. The program reduces the financial risk of leaving a salaried position to pursue a startup, particularly for researchers, scientists, and engineers with deep tech expertise who need income stability during the ideation phase.

NIDHI-SSS (Seed Support System)

SSS provides up to ₹1 crore in seed funding per startup through NIDHI-supported Technology Business Incubators (TBIs). This is higher than the SISFS grant limit and is available to startups with validated prototypes that need capital for initial production runs or market testing. Selection criteria prioritize technology novelty, market potential, and team capability.

Atal Incubation Centres (AICs) and Atal New India Challenges (ANIC)

AIM has established 68 Atal Incubation Centres across India, each receiving up to ₹10 crore over 5 years for infrastructure and operations. Deep tech startups incubated at AICs get access to lab space, prototyping equipment, mentorship, and seed funding. The Atal New India Challenges (ANIC) program provides grants up to ₹1 crore to startups developing product innovations in national priority sectors, including AI-driven solutions in healthcare diagnostics, agriculture, water management, and smart mobility.

iDEX: Defence Innovation Grants for AI Startups

The Innovations for Defence Excellence (iDEX) program, under the Defence Innovation Organisation (DIO), provides grants up to ₹1.5 crore to startups developing technologies for defence and dual-use applications. AI startups are well-positioned for iDEX because the Indian defence establishment has identified artificial intelligence as a priority technology area across all three armed forces.

How iDEX Works

1. DISC (Defence India Startup Challenges): The Ministry of Defence publishes specific technology problems (e.g., AI-powered drone navigation, predictive maintenance for military vehicles, satellite image analysis). Startups apply with solutions matching these requirements
2. Open Challenges: Startups can propose their own defence-relevant technologies outside the DISC framework through the open challenge window
3. Selection and funding: Applications are evaluated by domain experts from the armed forces and DRDO. Selected startups receive up to ₹1.5 crore, released in milestone-linked tranches
4. Procurement pathway: Successful iDEX products can receive procurement orders from the armed forces, creating a built-in government customer for your AI solution

AI applications funded through iDEX include autonomous surveillance systems, satellite image analysis for border monitoring, natural language processing for military communication, cybersecurity threat detection, and predictive logistics optimization. The program has supported over 400 startups since its launch in 2018.

If your AI technology has both civilian and defence applications, apply to iDEX for the defence use case while separately pursuing BIRAC or MeitY funding for the civilian application. These grants come from different ministries with independent evaluation processes, so there is no conflict in receiving funding from both sources for different applications of the same core technology.

Section 35 R&D Tax Deductions Explained

Tax deductions under Section 35 of the Income Tax Act are among the most financially significant benefits for deep tech startups. These deductions directly reduce taxable income, providing a meaningful cash flow advantage during the capital-intensive R&D phase.

How Section 35(2AB) Works in Practice

For a DSIR-recognized deep tech company spending ₹50 lakh on R&D in a financial year, the 100% weighted deduction under Section 35(2AB) means the entire ₹50 lakh is deductible from taxable income. Combined with the regular business expense deduction under Section 37, this creates a significant tax shield. At the 25% corporate tax rate applicable to domestic companies, a ₹50 lakh R&D spend generates approximately ₹12.5 lakh in tax savings annually.

Filing this deduction requires submitting Form 3CL (DSIR-certified R&D expenditure report) along with your income tax return. Your chartered accountant must audit the R&D expenditure and certify it in the tax audit report under Section 44AB. DSIR issues the Form 3CL electronically to both the company and the Income Tax Department.

State-Level Deep Tech Grants and Incentives

Several Indian states have launched dedicated deep tech and AI incentive programs that supplement central government schemes. These state programs often provide additional grants, stamp duty exemptions, and subsidized infrastructure that can be availed alongside central grants.

Apply for state schemes alongside central grants. Most state startup policies explicitly allow concurrent availing of state and central benefits with no overlap restrictions. A Bengaluru-based AI startup can simultaneously hold DPIIT recognition, Karnataka ELEVATE selection, BIRAC BIG funding, and DSIR R&D recognition without any conflict between the schemes.

Step-by-Step: How to Apply for Deep Tech Grants

The application process differs for each grant, but the foundational preparation is similar across all schemes. Follow this sequence to build a strong grant application pipeline for your deep tech startup:

1. Incorporate as a Private Limited Company: Most government grants require a registered company. Register a Pvt Ltd company with R&D focus clearly stated in the Memorandum of Association objects clause
2. Get DPIIT Startup India recognition: Apply through the Startup India portal at startupindia.gov.in. This is a prerequisite for SISFS and activates the Section 80-IAC tax holiday
3. File provisional patents: File patent applications for your core technology. Patent filings strengthen every grant application and demonstrate innovation commitment to reviewers
4. Set up a dedicated R&D facility: Even a 200 sq ft lab or a dedicated R&D workspace with identifiable equipment qualifies for DSIR. Document it with photographs, equipment inventories, and personnel assignment letters
5. Apply for DSIR recognition: Submit Form A on the dsir.gov.in portal with all supporting documents and prepare your R&D facility for the physical inspection
6. Apply to NIDHI-PRAYAS or SISFS: For pre-revenue startups, these programs provide the first ₹10 lakh to ₹50 lakh of non-dilutive capital
7. Apply to BIRAC BIG or MeitY TIDE 2.0: Once you have a prototype or proof-of-concept data, apply to the scheme matching your technology domain
8. Apply to iDEX or ANIC: If your technology has defence or national priority applications, add these programs to your application pipeline
9. Maintain ongoing compliance: File quarterly compliance reports, submit annual R&D returns to DSIR, and keep financial records audit-ready at all times

Common Mistakes When Applying for Deep Tech Grants

After reviewing hundreds of grant applications at the incubator level, these are the errors that most frequently lead to rejection:

1. Applying as an unregistered entity: BIRAC, SISFS, and DSIR all require a registered company or at minimum a registered LLP. Incorporate your entity before you begin the application process
2. Generic technology descriptions: Writing "We use AI and ML to solve problems" tells the reviewer nothing specific. Describe the exact algorithm, dataset size, accuracy metrics, and deployment environment in your proposal
3. No IP strategy: Grant reviewers look for patent filings, trade secret protections, or published research papers that demonstrate your technology is defensible and genuinely novel
4. Budget without justification: Listing "Cloud compute: ₹15 lakh" without explaining the specific provider, number of GPU hours needed, training run estimates, and expected outcomes signals poor project planning
5. Ignoring the published evaluation criteria: Each scheme publishes its scoring matrix. BIRAC BIG weights innovation novelty at 40%, team capability at 30%, and market potential at 30%. Align your application narrative to match these weights
6. Missing application deadlines: BIRAC BIG opens twice a year, iDEX DISC challenges have fixed windows, and SISFS funding is released in quarterly batches through incubators. Set reminders and prepare applications at least 2 months before each deadline
7. No financial projections: Grant agencies expect a 3 to 5-year financial model showing how the grant funds will be deployed, when revenue generation begins, and the path to financial sustainability. Engage virtual CFO services if you need professional help building these projections
8. Duplicate funding claims: Applying for the identical project deliverable to multiple agencies without proper disclosure. Most government schemes require a signed undertaking that you are not receiving duplicate funding for the same work from another government source

Fund of Funds for Startups (FFS) and Equity Funding Access

The Fund of Funds for Startups (FFS) is a ₹10,000 crore fund managed by SIDBI that does not invest directly in startups. Instead, it invests in SEBI-registered Alternative Investment Funds (AIFs), which then deploy capital to startups through equity investments. Over 130 AIFs have received commitments from FFS, channelling capital to 900+ startups across India.

For deep tech startups, FFS is relevant because it increases the supply of domestic venture capital. When a VC fund backed by FFS invests in your deep tech startup, you benefit from government-backed capital without the restrictions that come with direct government grants. The investment is equity-based, so it does not require grant utilization reports or milestone-linked disbursement.

To access FFS-backed capital, structure your startup as a Private Limited Company, maintain clean regulatory compliance, and build relationships with FFS-backed VC funds. The list of SIDBI-backed AIFs is published on the SIDBI website and updated quarterly.

2026 Outlook: Upcoming Changes for Deep Tech Grants

The Indian government's deep tech funding infrastructure is expanding across multiple dimensions in 2026. Deep tech founders who establish their grant application pipeline now will be positioned to access expanded funding as it becomes available through the year.

• Semiconductor Mission expansion: The India Semiconductor Mission (ISM) has approved 5 fabrication and OSAT units with combined investment exceeding ₹1.26 lakh crore. AI startups building chip design tools, EDA software, or semiconductor testing solutions will find new grant categories emerging from this initiative
• IndiaAI compute rollout: The 10,000+ GPU infrastructure under the IndiaAI Mission is expected to become operational in phases through 2026, giving AI startups subsidized access to model training compute that currently costs ₹5 lakh to ₹20 lakh per month on commercial cloud platforms
• Deep Tech Startup Policy implementation: The National Deep Tech Startup Policy from 2023 is expected to result in dedicated funding windows, IP fast-tracking mechanisms, and procurement preferences for deep tech products sold to government departments
• BIRAC scope expansion: BIRAC is expanding its funding scope to include AI-for-science applications beyond healthcare, covering climate modelling, materials discovery, and agricultural genomics in future funding calls
• State-level competition: Karnataka, Telangana, and Tamil Nadu are aggressively courting deep tech startups with state-level grants, subsidized land for R&D facilities, and tax incentives in their 2026 state budgets

Start with DPIIT Startup India recognition and the DSIR application in Q1 2026 to position your company for the expanded grant funding coming online through the rest of the financial year. Every month of delay reduces the window for stacking multiple grants before your startup ages out of early-stage eligibility criteria.