“Tax Holiday Till 2047”: Sitharaman Positions India’s Data Centres for Global Cloud

In a move aimed squarely at reshaping India’s digital infrastructure landscape, Nirmala Sitharaman, Finance Minister, Government of India, announced a long-term tax incentive for global cloud service providers that route their international operations through Indian data centres.

Presenting the Union Budget 2026–27, Sitharaman proposed a tax holiday until 2047 for foreign companies that deliver cloud services globally using data centres located in India, provided they operate through an Indian entity. The announcement positions India as a potential tax-neutral base for global cloud workloads.

“Attracting global business and investment, recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide a tax holiday until 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India,” Sitharaman said in her budget speech.

What Cloud Providers Must Do to Qualify

The incentive comes with clearly defined conditions. To avail of the tax holiday, foreign cloud firms must:

• Deliver services to Indian customers through an Indian reseller entity
• Route global cloud services through Indian data centres
• Adhere to a 15% safe harbour on cost if the data centre service provider is a related entity

The framework signals a policy shift from merely hosting infrastructure in India to embedding India deeper into global cloud value chains.

How the Cloud Tax Holiday Enables AI at Scale

The cloud tax holiday also underpins the government’s broader push to embed AI across economic and administrative workflows, where compute availability becomes a limiting factor.

S. Anjani Kumar, Partner at Deloitte India, said Budget 2026–27 treats AI as a horizontal enabler, with data centres forming the infrastructure backbone required to scale adoption.

“Union Budget 2026–27 positions AI as a force multiplier across the economy—from agriculture and skilling to logistics and governance. Initiatives such as AI-enabled advisory platforms, workforce matching, and risk assessment systems will all depend on reliable, scalable compute. The tax holiday and safe-harbour regime for cloud providers using Indian data centres signals a long-term commitment to building that compute backbone in India.”

Cloud, AI, and the Long View to 2047

The timing of the tax holiday is notable. The global data centre market is projected to expand sharply over the next decade, with Asia-Pacific expected to grow at the fastest pace. By extending incentives until 2047, the government is offering cloud majors policy certainty across multiple technology cycles, including AI, high-performance computing, and sovereign data platforms.

Electronics Manufacturing Gets a Parallel Push

Alongside cloud incentives, Sitharaman flagged tax reforms aimed at strengthening India’s electronics manufacturing ecosystem. To support just-in-time logistics, the budget proposes a safe harbour of 2% of invoice value for non-residents storing electronic components in bonded warehouses.

The effective tax burden of about 0.7%, the Finance Minister noted, would be lower than in competing jurisdictions, making India more attractive for global electronics supply chains.

A Growing Data Centre Investment Pipeline

The budget announcement builds on momentum already visible in India’s data centre market. Over the past year, global technology firms and Indian conglomerates, including Google, Microsoft, Tata Group, Reliance Industries, Adani Group, and Greenko Group, have announced large-scale data centre investments, with cumulative commitments crossing $75 billion in 2025.

These investments, spread over multiple years, underline growing confidence in India’s digital infrastructure story, now reinforced by long-term tax certainty.

What This Flags for Enterprises and Startups

For enterprises, startups, and cloud-native businesses, Budget 2026 sends a clear signal: India wants to host the world’s data, not just consume its services.

The tax holiday, combined with manufacturing-friendly reforms, suggests a policy effort to align cloud, AI infrastructure, and electronics manufacturing into a single growth narrative. For global cloud providers, India is no longer just a market; it is being positioned as a base.

Rather than a one-off concession, the tax holiday through 2047 reflects a long-term policy bet on digital infrastructure as a foundational layer of economic growth. Execution and regulatory clarity will determine outcomes, but the intent is unmistakable.

With Budget 2026, the government has made its pitch clear: build cloud infrastructure in India, and India will build policy certainty around you.