Foreign cloud companies will get 20-year tax rebate, but conditions apply

Foreign cloud service providers will get a 20-year tax exemption in India, provided they meet specific conditions, officials said. To qualify, the foreign company must be formally notified, procure services from an Indian data centre that is notified by the electronics and information technology ministry, and offer services to Indian users through a locally incorporated reseller.

The exemption, effective from the 2026-27 tax year until 2046-47, shields foreign companies’ global income from Indian taxation arising from their use of Indian data centres. However, profits earned domestically—such as income of the Indian data centre from providing services to the global entity or the Indian reseller from reselling cloud services to Indian customers- —remain fully taxable.

“The profits on the income from data centre services to the global entity by the resident data centre, and resale of cloud services to Indian customers by the resident reseller entity, will remain taxable as for any other domestic company,” said an official, who did not wish to be identified.


While the tax holiday applies to foreign firms’ global income, in cases where the Indian data centre is a related entity of the foreign company, a safe harbour margin of 15% will apply. The measure is designed to provide certainty to global cloud firms while encouraging the expansion of domestic data centre infrastructure.

“The treatment of foreign cloud services entities is the same whether the data centre is Indian owned or a subsidiary of the global entity,” said a senior finance ministry official. This allows Indian data centres to offer services to global cloud players without any perceived tax risk.

The tax certainty is expected to encourage greater investment in India’s rapidly growing data centre sector, positioning the country as a hub for global cloud infrastructure. Officials said the clarification came after “misinformed concerns” that big firms such as Microsoft, Amazon Web Services and Google could get unfair advantage over domestic firms that have invested billions in India’s digital infrastructure.