Telangana Explores AI Tax to Offset Job Losses, Says Revanth Reddy

Telangana Chief Minister A. Revanth Reddy on Friday said the state government is exploring a policy framework to introduce an AI tax offset aimed at compensating people who may lose jobs due to automation.

Speaking at an AI symposium hosted by Harvard Kennedy School, Reddy described artificial intelligence as a “double-edged sword” , cautioning that its risks could outweigh benefits if not regulated early.

He said the proposed model draws parallels with carbon credit systems , where polluting industries are required to compensate for environmental damage. “We will examine a mechanism where AI-driven firms contribute through ‘people credits’ if their technologies lead to job displacement,” he said, stressing that companies with massive valuations must share responsibility for societal impact.

The AI tax offset is intended as a compensation and support mechanism rather than a penalty. Funds generated could be used for reskilling programmes, social welfare measures, and workforce transition support , particularly for those affected by automation.

The policy, still at a conceptual stage , is likely to be applicable initially within Telangana, targeting large AI companies, tech firms, and Global Capability Centres (GCCs) that deploy automation at scale. Sectors such as IT services, healthcare, legal services, and digital content creation where AI adoption is accelerating could see the most impact.

While noting that technological advancements have historically augmented rather than replaced human work , Reddy cautioned that entry-level hiring may decline , even as productivity improves.

He also highlighted the state’s vision for a dedicated AI ecosystem within the proposed ‘Bharat Future City’ near Hyderabad, envisioned as a hub for AI innovation and investment.

However, key challenges remain, including defining job loss due to AI, determining levy structures, and ensuring firms do not relocate to avoid compliance.