The Budget’s hidden power move: Cybersecurity and Data Centres in focus.

India’s digital economy is expanding at remarkable speed. From online banking and government platforms to cloud services and artificial intelligence, data has become the backbone of national growth. As this digital footprint expands, so does the need for secure, resilient, and scalable infrastructure.

This year’s union Budget recognises this reality and lays a measurable foundation for cybersecurity and data centres as strategic pillars of India’s technology-driven future. At a time when global enterprises are reassessing supply-chain dependencies and technology risks, this year’s budget sends a clear signal: India is ready to move decisively up the digital value chain and position itself as a trusted global hub for secure digital infrastructure and innovation.

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A key enabler of this transition is the rationalisation of customs levies on technology and electronic imports. As announced, a reduction in the tariff rate on all dutiable goods imported for personal use from 20 per cent to 10 per cent.
While framed as a consumer-friendly measure, its implications are far broader, improved affordability of advanced devices, servers, processors, and networking equipment directly supports the deployment of modern, high-performance data centers and cybersecurity platforms.

Strong cybersecurity begins with strong infrastructure. Advanced hardware enables faster encryption, real-time threat detection, and resilient data storage architectures—capabilities that are essential for protecting sensitive information across sectors such as banking, healthcare, government platforms, and critical infrastructure.
This budget further strengthens India’s digital infrastructure story through targeted fiscal incentives for data centres. The foreign companies providing global cloud services using data centres located in India will be eligible for a tax holiday extending up to the year 2047.

Given the capital-intensive and long-gestation nature of data centre investments, this long-term certainty significantly improves India’s attractiveness as a destination for hyperscale, and enterprise data centre led projects. To reduce transfer pricing friction, the budget also provided a safe harbor margin of 15 per cent on cost for related-party data centre service arrangements.

Together, these measures lower operational uncertainty and create a predictable environment for large-scale digital infrastructure investments, where cybersecurity frameworks must be designed and maintained over decades.
This move brings long-awaited clarity and confidence to the tax environment for IT services. The introduction of a single, unified category of Information Technology services, coupled with a standardised safe harbour margin of 15.5 per cent, meaningfully simplifies compliance and reduces interpretational risk.
Even more impactful is the substantial increase in the safe harbor turnover threshold from Rs 300 crore to Rs 2,000 crore. This reform directly enhances tax predictability for a far wider set of mid-to-large IT enterprises, enabling leadership teams to plan investments, pricing strategies, and global delivery models with greater certainty and long-term confidence.
This six-fold increase materially reduces tax uncertainty and compliance risk for Indian IT, cloud, and cybersecurity firms. For foreign technology companies operating delivery centres or security operations from India, it provides confidence to scale operations without fear of sudden or retrospective tax exposure.
The introduction of Semiconductor Mission 2.0, outlined a renewed ambition that moves beyond scale-driven manufacturing toward innovation-led capability building, covering semiconductor equipment, materials, and full-stack Indian intellectual property.
An allocation of Rs 1,000 crore has been provided for Semiconductor Mission 2.0 in FY 2026–27, alongside an enhanced outlay of Rs 40,000 crore under the Electronics Components Manufacturing Scheme.
This shift has deep implications for cybersecurity and data sovereignty. As India progresses from assembly and packaging to semiconductor design, fabrication, and advanced innovation, dependence on external supply chains reduces. Greater domestic control over core technologies strengthens hardware-level security, trusted computing environments, and supply-chain integrity—critical foundations for secure data centers and national digital resilience.
These reforms collectively move India higher up the global technology value chain—from being primarily a centre of assembly to becoming a hub for design, fabrication, and advanced innovation. For global enterprises operating under stringent security, compliance, and data-protection regimes, such capability building enhances confidence in India as a reliable destination for secure cloud deployments, AI platforms, and large-scale data center investments.

The budget also strengthens the long-term outlook for AI (artificial intelligence). AI systems depend on massive computing power, secure data flows, and trusted infrastructure. Without robust cybersecurity, AI risks becoming vulnerable to breaches, misuse, and erosion of public trust.

By lowering customs levies, committing Rs 1,000 crore to semiconductor innovation, providing tax certainty up to 2047 for data centres, and easing compliance through expanded safe harbour limits, the Budget reinforces the secure backbone required for responsible and scalable AI growth.

The impact of these measures will not be measured merely by the number of data centres or headline investment figures. Their true success will be reflected in the strength of India’s digital defences, the resilience of its technology supply chains, and the confidence global enterprises place in India as a trusted technology partner.
As India advances toward a trillion-dollar digital economy, secure infrastructure will be as vital as rapid growth. This Budget lays the groundwork for both.

By aligning semiconductor strategy, quantified tax certainty, and innovation-led capability building, it charts a path toward a safer, stronger, and more competitive digital future. In doing so, the Budget does more than support technology sectors—it reinforces the foundation of Digital India itself, built on trust, stability, and long-term vision.

(The author is Managing Director at Protiviti Member Firm for India. Views are personal)