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India's 2047 Tax Holiday Aims to Make Nation Global Cloud & AI Hub

The Indian government's Budget 2026-27 introduces a major tax incentive, exempting eligible foreign cloud service providers from income tax until 2047 to anchor digital infrastructure investment. This policy is designed to provide long-term certainty for capital-intensive data centre projects, with nearly $70 billion already underway and $90 billion more announced. It complements other initiatives like the India Semiconductor Mission 2.0 and a new safe harbour margin for IT services. The move strategically positions India in the intensifying global competition for AI and cloud infrastructure.

Key Points: Budget 2026-27: Tax Holiday for Foreign Cloud Providers Till 2047

  • Tax holiday for foreign cloud providers till 2047
  • Part of push to attract $90B in data centre projects
  • Complements India Semiconductor Mission 2.0
  • Aims to capture AI infrastructure demand
2 min read

Budget 2026-27 fuels India's rise as a global hub for cloud, AI Infrastructure

India announces a tax holiday until 2047 for foreign cloud service providers to boost data centre investment and position the country as a global AI infrastructure hub.

"provide investment certainty, anchor high-value digital infrastructure within the country, and strengthen India's role in global digital value chains - Government statement"

Mumbai, Feb 14

The tax holiday for foreign cloud service providers aims to "provide investment certainty, anchor high-value digital infrastructure within the country, and strengthen India's role in global digital value chains," the government said on Saturday.

The Government has announced a tax holiday till 2047 in Budget 2026-27 for eligible foreign cloud service providers operating through India-based data centre infrastructure. Such companies' income will be exempt from Indian taxation from tax year 2026-27 till 2046-47 subject to conditions.

"The proposed tax framework extending to 2047 provides long-term policy visibility for such capital-intensive investments. The tax holiday for foreign cloud providers complements broader other Budget 2026-27-led initiatives, including India Semiconductor Mission 2.0 and enhanced allocation for the Electronics Components Manufacturing Scheme," an official statement said.

Together, these initiatives address different layers of the technology value chain, from semiconductor design and materials to electronics components, IT services and digital infrastructure.

Investments of nearly $70 billion are already underway in India's data centre sector, with an additional $90 billion in announced projects, highlighting the scale of expansion, the statement said.

Industry estimates indicated that India's cloud data centre capacity has reached around 1,280 MW and is projected to grow four to five times by 2030.

Amidst intensifying global competition for AI infrastructure, the policy positions India as a credible and long-term destination for cloud and data centre investment, it added.

United Nations Conference on Trade and Development (UNCTAD) estimates suggested that data centres accounted for over one fifth of global greenfield project values in 2025, with announced investments exceeding $270 billion. Rapid growth in AI compute demand and data-intensive digital services is intensifying international competition to attract such infrastructure.

The Budget also announced the launch of India Semiconductor Mission 2.0 with a provision of Rs 1,000 crore, to focus on design and manufacturing of semiconductor equipment in India as well as components manufacturing useful for semiconductor production. The scheme has received 149 applications, exceeded earlier expectations and reflected strong industry participation.

The Budget also proposed a common safe harbour margin of 15.5 percent for IT services, one of India's largest export sectors, with exports exceeding $220 billion.

- IANS

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Reader Comments

A
Arjun K
Great for attracting investment, but I hope there are strong data localization and security clauses. We must ensure Indian citizens' data is protected and doesn't just become a commodity for foreign corporations. The policy needs careful oversight.
R
Rohit P
$160 billion in data centre projects? That's insane! This will create so many high-skilled jobs for our engineers and technicians. Finally, we are moving from being just an IT services hub to owning the physical infrastructure too. Big win!
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Sarah B
As someone working in tech, the clarity on the 15.5% safe harbour margin for IT services is a huge relief. It simplifies so much for exporters. Combined with the semiconductor mission, this budget truly connects all dots in the tech value chain.
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Vikram M
While the ambition is good, I'm concerned about the environmental cost. Data centres consume massive power and water for cooling. I hope the government mandates green energy use and sustainable practices for these projects. Growth must be responsible.
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Karthik V
This is how you compete with China and others in the AI race. By providing policy certainty for 20+ years, we are telling the world that India is open for business and here to stay as a tech superpower. The Semiconductor Mission 2.0 is the cherry on top!

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