India Grants Tax Relief To Apple On Manufacturing Machines
India has handed a significant win to Apple by allowing foreign companies to provide equipment to their contract manufacturers in certain areas for five years without facing tax liabilities. The decision, announced on Sunday, is expected to boost Apple’s investment in India and encourage other electronics companies to expand locally.
Apple has been steadily increasing its presence in India as it diversifies production beyond China. Counterpoint Research reports that the iPhone’s share of the Indian market has doubled to 8% since 2022. While China still accounts for 75% of global iPhone shipments, India’s share has risen to 25% in the same period.
Legal Changes Facilitate Investment
Apple had lobbied the Indian government to clarify income tax rules, ensuring it would not be taxed for owning high-end iPhone machinery provided to its contract manufacturers. Under Indian law, paying for machines could be interpreted as creating a “business connection,” potentially triggering taxes on iPhone sales profits. This forced contract manufacturers such as Foxconn and Tata to bear billions of dollars in equipment costs themselves.
In response, India’s 2026-27 budget, presented by Finance Minister Nirmala Sitharaman, introduced measures stating that mere ownership of machinery by a foreign company will not attract taxes if it is used by a local contract manufacturer. Revenue Secretary Arvind Shrivastava explained, “If you bring your machine, and that machine is used by a local manufacturer to produce something, we will … exempt you for five years. We are giving them certainty.”
Encouraging Manufacturing And Exports
The exemption applies until the 2030-31 tax year and only in customs-bonded areas, which are technically outside India’s customs border. Products sold domestically from these facilities remain subject to import duties, making the provision primarily attractive for exports. The government clarified, “Any income arising on account of providing capital goods, equipment or tooling to a contract manufacturer, being a company resident in India, is eligible for exemption.”
Experts say the move will remove a key hurdle for global electronics manufacturers. Shankey Agrawal of BMR Legal noted, “The result is faster scale-up and greater confidence for global electronics players to manufacture in India.”
Unlike Apple, Samsung is largely unaffected, as most of its Indian production occurs in its own factories rather than through contract manufacturers. Apple has held extensive discussions with Indian officials to secure this legal clarity and safeguard its future growth in the country.
With inputs from Reuters