India Grants 20-Year Tax Holiday For Foreign Data Centres
India on Sunday announced that foreign companies using data centres in the country to provide services to global clients will not face any taxes for more than 20 years. The measure aims to address concerns about potential tax liabilities for international tech firms operating in India.
In recent years, India has seen rapid growth in its data centre sector. However, lawyers had noted that foreign companies feared New Delhi might one day impose taxes on their global income simply because they used a data centre located in the country. Finance Minister Nirmala Sitharaman addressed these concerns in her 2026-27 budget speech. She stated that India will “provide (a) tax holiday till 2047 to any foreign companies that provide cloud services to their customers globally, by using data centre services from India.”
Legal Clarity And Stability
Vaibhav Gupta, partner at tax firm Dhruva Advisors, said the announcement brings clarity to foreign companies and ensures stability in their tax position in India until 2047. “Foreign companies would no longer need to worry about potential taxes on their global income on the basis they use a data centre in India,” he explained.
The move is expected to encourage further investment in India’s rapidly expanding digital infrastructure. Google, for example, announced in October that it would invest $15 billion in an AI data centre project in Andhra Pradesh. Microsoft and Amazon have also poured billions into data centres across the country, while Indian conglomerates such as Adani and Reliance are increasing their presence in the sector.
Boosting India’s Global Digital Role
IT Minister Ashwini Vaishnav highlighted the strategic importance of data centres for India. “Data centres will be a major strength for India through which we can provide new services to the world,” he said. Analysts suggest the tax holiday will reinforce India’s position as a preferred destination for cloud and AI infrastructure, encouraging foreign and domestic investment alike.
The tax certainty provided by this policy is seen as a major step in strengthening India’s digital economy, offering global companies a predictable framework for long-term operations in the country.
With inputs from Reuters