Finance Minister Nirmala Sitharaman on Sunday outlined a landmark tax incentive for global technology firms in her presentation of the union Budget 2026‑27, aimed at positioning India as a premier global hub for cloud computing and digital infrastructure.
Under the proposals, the government will grant a tax holiday until the year 2047 to foreign companies that provide cloud services globally from data centres based in India, marking one of the most significant overseas investment incentives in recent memory. This benefit will apply on the condition that services are routed through Indian reseller entities, encouraging local integration of global technology operations.
In addition to the extended tax break, the Budget proposes a 15 per cent safe harbour provision on costs for cases where foreign cloud service providers co‑provide data services with related Indian entities. This mechanism is expected to reduce tax disputes and simplify compliance for multinational groups operating through Indian affiliates.
Industry associations such as Nasscom had earlier called for clearer tax guidelines and a more supportive regime for cloud and data infrastructure to spur investment and innovation. Their pre‑Budget advocacy highlighted the need for regulatory clarity, especially regarding the taxation of foreign cloud firms leveraging Indian data centres, to build confidence among global investors.
Policy experts and tax advisors have also underlined broader challenges in the sector. They note that uncertainties around permanent establishment (PE) and significant economic presence (SEP) rules have previously deterred some foreign players, and have urged clarification to align international tax practices with India’s digital growth ambitions.
Market analysts say the tax holiday could significantly enhance India’s attractiveness as a destination for hyperscale cloud investments and support the rapid expansion of the domestic data centre ecosystem, which industry forecasts suggest will grow strongly in the coming years. Government moves to foster data infrastructure investment come amid wider global competition for cloud capacity and digital innovation.