India Offers Tax Holiday Until 2047 for Foreign Cloud Firms

Finance Minister Nirmala Sitharaman announced in the Union Budget 2026-27 a strategic tax holiday extending to March 31, 2047, for notified foreign companies providing cloud services to global customers via data centers located in India. To qualify, these firms must use infrastructure owned by an Indian company and route all domestic sales through local reseller entities. The government also introduced a 15% cost-plus safe harbor margin for data center operators serving related foreign entities to reduce transfer pricing disputes.

This policy aims to position India as a global AI and digital infrastructure hub, coinciding with massive commitments from Google ($15 billion), Microsoft ($17.5 billion), and Amazon ($75 billion total by 2030). Parallel initiatives include the India Semiconductor Mission 2.0, which increased the Electronics Components Manufacturing Scheme outlay to ₹40,000 crore, and the establishment of rare-earth corridors in Odisha, Kerala, and Tamil Nadu.

While the government views the move as a generational bet for the AI economy, the policy sparked criticism from domestic providers. The Bharat Digital Infrastructure Association argues the measure creates an unfair advantage for global hyperscalers since Indian firms still face a 25.7% corporate tax. Additionally, analysts warn that power shortages and water scarcity may constrain the expansion of energy-intensive GPU facilities. Meanwhile, the government shifted its AI strategy toward business-oriented applications, halving the India AI Mission allocation from ₹2,000 crore to ₹1,000 crore.