Finance Minister Nirmala Sitharaman has announced a tax holiday until 2047 for foreign companies offering cloud services globally using Indian data centers, as part of the Union Budget 2026-27 proposals. This initiative aims to enhance critical infrastructure and attract investments in data centers. Companies must serve Indian customers through an Indian reseller entity to qualify for this incentive.
The budget also includes a safe harbor provision of 15% on costs for companies utilizing data center services from India if they are related entities. Additionally, to streamline electronic manufacturing logistics, the Finance Minister proposed a safe harbor for non-residents to warehouse components in bonded warehouses at a 2% profit margin, resulting in significantly lower taxes compared to other jurisdictions.
Furthermore, to promote toll manufacturing in India, the Finance Minister suggested a five-year income tax exemption for non-residents providing capital goods, equipment, or tooling to toll manufacturers in bonded zones. The budget also offers an exemption on global (non-India-sourced) income for non-resident experts staying in India for up to five years under specific schemes, encouraging global talent to work in the country for extended periods.
Moreover, the budget proposes to waive Minimum Alternate Tax (MAT) for non-residents paying tax on a presumptive basis. Sitharaman emphasized that the budget is geared towards sustaining structural reforms, fostering cutting-edge technologies like AI, and maintaining forward-looking growth strategies.
