India has proposed an india data centres tax holiday until 2047 for foreign companies providing cloud services globally through local data centres, as outlined in the Union Budget 2026-27. Finance Minister Nirmala Sitharaman presented the incentive to attract long-term investment in digital infrastructure, cloud computing and artificial intelligence capabilities.
The india data centres tax holiday applies to foreign firms that use data centres located in India to serve international customers. Services provided to Indian customers must be routed through a local reseller entity to ensure applicable domestic taxation. A related india tax holiday foreign cloud companies measure includes a 15 percent safe harbour on cost for related-party data centre services supplied within India.
Finance Minister Nirmala Sitharaman stated during her budget speech: “Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India. It will, however, need to provide services to Indian customers through an Indian reseller entity.”
The budget 2026 india data centre incentive is designed to encourage hyperscale facilities, AI compute clusters and cloud platforms. Communications, Electronics & Information Technology Minister Ashwini Vaishnaw described data centres as foundational to India’s digital strength, enabling new global services.
Why the India data centres tax holiday Matters for South Asia
South Asia’s digital economies are expanding quickly. India’s policy tackles infrastructure and power constraints while drawing significant foreign direct investment. Neighbouring countries, including Pakistan, monitor the development closely. It may influence regional tech investment patterns, cross-border data flows, talent movement and competitive benchmarking against local incentives. The measure creates potential for supply-chain linkages and collaborative opportunities in cloud and AI across the region.
The india data centres tax holiday reduces long-term tax uncertainty for foreign operators concerned about future liabilities on global revenues tied to Indian facilities. Vaibhav Gupta, partner at tax advisory firm Dhruva Advisors, noted: “This announcement helps in bringing clarity to foreign companies and lends stability in (their) tax position in India till 2047,” explaining that firms would no longer face potential taxation on global income linked to data centre operations in India.
Global technology companies have already committed substantial capital. Google has announced plans to invest $15 billion in an AI-focused data centre project in Andhra Pradesh. Microsoft, Amazon Web Services and domestic players such as Adani and Reliance have invested billions in local infrastructure.
The India 20-year tax holiday for data centres running effectively beyond 20 years until 2047, delivers fiscal predictability for projects that require heavy upfront capital. Industry feedback highlights accelerated capacity expansion and faster enterprise adoption of cloud services.
India Tax Holiday Foreign Cloud Companies: Key Conditions
Eligibility covers only revenues from global cloud services delivered via Indian data centres. Domestic revenues must pass through an Indian reseller for taxation purposes. The budget 2026 India data centre incentive includes the 15% safe harbour mechanism to limit transfer pricing disputes involving related entities.
The policy targets major cloud providers scaling AI workloads. While power reliability and sustainability challenges persist, the incentive is expected to drive additional investment to address them.
Background on India’s Data Centre Push
India’s data centre sector has grown rapidly, fuelled by digital payments, streaming services, online gaming and enterprise cloud migration. Global and domestic investments reflect strong sector potential. The india data centres tax holiday extends earlier policy efforts and aligns with the long-term goal of Viksit Bharat by 2047.
The Press Information Bureau confirmed the proposal as a direct tax measure to attract international business. Official releases state the tax holiday till 2047 for foreign companies using Indian data centre services for global cloud provision, together with the 15% safe harbour.
What’s Next for the India data centres tax holiday
The proposal requires passage through the Finance Bill and issuance of detailed implementation rules. Industry observers anticipate increased foreign commitments once procedural clarity is established. The india data centres tax holiday is positioned to strengthen India’s competitiveness against established hubs such as Singapore and Ireland amid growing global demand for AI and cloud infrastructure.
Published in SouthAsianDesk, February 2nd, 2026
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