Budget 2026: Foreign companies to get tax-free ride till 2047 for betting on India's data centres

Finance Minister Nirmala Sitharaman on Sunday proposed a tax holiday until 2047 for foreign companies providing cloud services to customers globally, provided they use data centre services based in India, as part of the Union Budget 2026.

Speaking during her Budget speech, Sitharaman said the move was aimed at attracting global business and investment while recognising the critical role of digital infrastructure. “To attract global business and investment, and to recognise the need to enable critical infrastructure, we propose to provide a tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India,” she said.

In practical terms, the proposal allows foreign cloud service providers — offering storage, computing or software services online — to set up data centre operations in India and earn revenue from global customers without their global income being taxed in India until 2047. However, to avail of the benefit, such companies must serve Indian customers through a local reseller entity, which will continue to be taxed in India.


Explaining the rationale behind the move, Revenue Secretary Arvind Shrivastava said global cloud companies typically operate data centres across multiple countries, making it difficult to link revenue to any single facility. Taxing global income merely because a data centre is located in India, he said, could create uncertainty and deter investment.

Shrivastava said the government views the setting up of data service centres in India as a net economic positive, as it expands scale and economic activity. “What we are excluding from taxation is the global entity which is essentially doing cloud-based services using data service centres across countries. We do not want it to be deterred from enhancing its services business footprint in India,” he said in a Post-Budget Press Conference, adding that the data centre entity in India and reseller operations serving Indian customers will remain within the tax net.

The finance minister also announced a safe harbour of 15% on cost in cases where the data centre service provider in India is a related entity, aimed at providing additional certainty on transfer pricing.

Industry executives said the measures signal a strong push to position India as a global hub for cloud and AI infrastructure. Deepak Bhalla, Executive Vice President and Chief Risk Officer at Infosys, told Reuters the Budget showed a clear focus on the IT sector. He said the government was trying to attract foreign companies to set up global capability centres (GCCs) in India, supported by tax holidays for data centre companies and a five-year safe harbour for smaller IT firms.

Real estate and infrastructure players also welcomed the move. Amit Sarin, Managing Director at Anant Raj Limited, said the tax holiday reflects a long-term commitment to attracting capital and improving the viability of large-scale data centre investments. He said the measures would enable faster capacity addition, create high-quality jobs and strengthen India’s broader technology ecosystem.

Ritvik Dashora, CEO of Tradomate, said the policy positions India not just as a digital consumption market but as a global backend for cloud and AI infrastructure. He noted that data centres are capital-intensive projects with long payback periods, and policy certainty over two decades could make India more competitive with established hubs such as Singapore and Ireland.

The Budget announcement comes amid growing global investment commitments.

Microsoft has pledged $17.5 billion for AI-related projects in India over the next four years, Amazon plans to invest $35 billion over five years in AI-driven operations, while Google has committed $15 billion towards developing data centres in partnership with Adani Group and Bharti Airtel. Media reports have also indicated that Meta is developing a 500 MW data centre facility in India.