Mumbai, February 14 – The tax holiday for foreign cloud service providers aims to “provide investment certainty, anchor high-value digital infrastructure within the country, and strengthen India’s role in global digital value chains,” the government said on Saturday.
The government has announced a tax holiday until 2047 in the 2026-27 budget for eligible foreign cloud service providers operating through India-based data center infrastructure. The income of such companies will be exempt from Indian taxation from the 2026–27 tax year until 2046–47, subject to certain conditions.
“The proposed tax framework extending to 2047 provides long-term policy visibility for such capital-intensive investments. The tax holiday for foreign cloud providers complements other initiatives under the 2026–27 budget, including the India Semiconductor Mission 2.0 and enhanced allocation for the Electronics Components Manufacturing Scheme,” an official statement said.
Together, these initiatives address different layers of the technology value chain, from semiconductor design and materials to electronics components, IT services, and digital infrastructure.
Investments of nearly $70 billion are already underway in India’s data center sector, with an additional $90 billion in announced projects, highlighting the scale of expansion, the statement said.
Industry estimates indicated that India’s cloud data center capacity has reached around 1,280 MW and is projected to grow four to five times by 2030.
Amid intensifying global competition for AI infrastructure, the policy positions India as a credible and long-term destination for cloud and data center investment, it added.
The United Nations Conference on Trade and Development (UNCTAD) estimates suggest that data centers accounted for over one-fifth of global greenfield project values in 2025, with announced investments exceeding $270 billion. Rapid growth in AI compute demand and data-intensive digital services is intensifying international competition to attract such infrastructure.
The budget also announced the launch of India Semiconductor Mission 2.0 with a provision of Rs 1,000 crore, to focus on the design and manufacturing of semiconductor equipment in India, as well as the production of components useful for semiconductor production. The scheme has received 149 applications, exceeding earlier expectations and reflecting strong industry participation.
The budget also proposed a common safe harbor margin of 15.5 percent for IT services, one of India’s largest export sectors, with exports exceeding $220 billion.
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