New Delhi — India’s finance minister unveiled a sweeping tax incentive in the Union Budget 2026, proposing a tax holiday until 2047 for foreign cloud companies that operate through data centres in the country, a bid to position India as a premier global hub for digital infrastructure.
India’s 2026–27 federal budget, presented on Feb. 1, includes a landmark proposal to offer foreign cloud service providers a tax holiday on global revenues generated through data centres located in India, a move that could redefine the country’s role in the global digital economy. The tax relief would run until the year 2047, effectively spanning more than two decades of potential foreign investment incentives. :contentReference[oaicite:1]{index=1}
Finance Minister Nirmala Sitharaman outlined the plan in Parliament, saying the measure was designed to “attract global business and investment” and to recognise the strategic need to build critical digital infrastructure at scale. Under the proposal, foreign cloud companies including industry giants such as Amazon Web Services, Google Cloud and Microsoft could qualify for the tax break if their operations use Indian data centre facilities and they route services for Indian customers through a local reseller entity.
The incentive is structured as a tax holiday — effectively a period during which qualifying companies pay no corporate taxes on revenue from cloud services delivered to global clients from India. Critics and supporters alike have called the proposal unprecedented in its duration and scope, underscoring New Delhi’s desire to compete with other regions such as the United States, Europe and Southeast Asia for cloud and artificial intelligence (AI) infrastructure investment.
“To recognise the need to enable critical infrastructure and boost investment in data centres, we propose a tax holiday until 2047 for companies that provide cloud services globally using data centre services from India,” Sitharaman told lawmakers during her budget speech. She added that services provided to Indian customers must be delivered through an Indian reseller to ensure the domestic tax regime remains intact for onshore transactions.
Industry analysts welcomed the announcement as a bold effort to drive long-term investment into India’s burgeoning digital infrastructure sector. “This provides long-term tax clarity and stability for multinational firms looking to invest in hyperscale data centres in India,” said Vaibhav Gupta, a tax partner at Dhruva Advisors. “It signals to global cloud providers that India is open for business at scale.”
The move comes against the backdrop of massive investment commitments already flowing into India’s tech ecosystem. Google recently announced a roughly $15 billion AI and data centre hub in Andhra Pradesh, while Microsoft and Amazon have each outlined multibillion-dollar expansions of cloud capacity in the country. Indian firms such as Reliance Industries and the Adani Group are also expanding their data centre footprints, contributing to what government officials describe as an emerging global centre for digital services.
Critics caution that the policy’s impact will depend on implementation details and broader challenges, including infrastructure constraints such as electricity supply, water availability and real estate costs for large data campuses. Some experts also note that the requirement to serve Indian clients through a local reseller — while designed to protect domestic tax revenues — could complicate the incentive’s appeal for multinational firms.
As the government moves to finalize the legislative text later this year, markets and tech executives will be watching closely to see whether the proposal delivers on its ambition to make India a cornerstone of global cloud computing and AI infrastructure. “If fully implemented, this could mark a shift in how cloud capacity is distributed globally,” Gupta said.