The Union Budget 2026–27 unveiled a major tax incentive to attract foreign cloud providers and AI firms to India. Under the new policy, companies operating AI and cloud services from Indian data centres will pay zero corporate tax on revenues until 2047, provided they serve Indian customers through a locally incorporated reseller.
The government has also introduced a 15% safe-harbour tax regime for Indian data centre operators serving foreign clients. This ensures predictability for investors and encourages long-term infrastructure expansion. The measures are aimed at strengthening India’s digital backbone, boosting cloud and AI capacities, and making the country a global hub for advanced computing services.
Industry leaders have welcomed the move as a significant step to attract multinational technology firms to set up or expand data centre operations in India. Analysts predict that the policy could generate thousands of jobs, enhance technology transfer, and position India competitively against established AI and cloud markets in the US, Europe, and Asia.
However, experts have also flagged potential challenges, including ensuring sufficient power and water supply, handling cooling requirements, and streamlining regulatory approvals. The government will need to address these infrastructure and operational hurdles to make the policy fully effective.
By offering a 21-year tax holiday, India aims to provide certainty and long-term incentives for global firms to invest in local infrastructure, secure local market participation, and establish a durable technological presence.
This initiative is part of a broader push to expand India’s digital ecosystem, encourage private investment in data centres, and foster growth in emerging technologies such as AI, cloud computing, and machine learning.
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