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Tax Holiday Till 2047: Sitharaman's Big Budget Push For Data Centres

Finance Minister Nirmala Sitharaman has proposed a major tax incentive, offering a tax holiday until 2047 to foreign companies providing global cloud services via Indian data centres. The budget also introduces a 15% cost safe harbour for related-party data centre service providers and a 2% profit margin safe harbour for component warehousing to boost electronics manufacturing. Additionally, a five-year income tax exemption is proposed for non-residents supplying capital goods to toll manufacturers in bonded zones. These measures are part of broader indirect tax reforms aimed at simplifying tariffs and enhancing India's export competitiveness.

Key Points: Budget 2026: Tax Holiday For Data Centres, Toll Manufacturing Boost

  • Tax holiday for foreign cloud firms till 2047
  • Safe harbour for related data centre entities
  • 2% profit margin safe harbour for component warehousing
  • 5-year tax exemption for toll manufacturing capital
2 min read

Budget 2026: Sitharaman announces tax holiday till 2047 to boost data centre ecosystem

FM Sitharaman announces tax holiday till 2047 for foreign cloud firms using Indian data centres, plus new safe harbour & warehousing rules in Union Budget.

"The resultant tax of about 0.7 percent will be much lower than in competing jurisdictions - Nirmala Sitharaman"

New Delhi, February 1

Recognising the need to enable critical infrastructure and boost investment in data centres, Finance Minister Nirmala Sitharaman has proposed to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India.

It will, however, need to provide services to Indian customers through an Indian reseller entity, Finance Minister said, presenting the Budget for 2026-27 in the Parliament on Sunday.

She also proposed to provide a safe harbour of 15 per cent on cost in case the company providing data centre services from India is a related entity.

To harness the efficiency of just-in-time logistics for electronic manufacturing, she proposed to provide safe harbour to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value.

"The resultant tax of about 0.7 percent will be much lower than in competing jurisdictions," she asserted.

Further, to provide fillip to toll manufacturing in India, the Finance MInister proposed to provide exemption from income tax for 5 years, to any non-resident who provides capital goods, equipment or tooling, to any toll manufacturer in a bonded zone.

Presenting the Budget, Finance Minister Nirmala Sitharaman also announced a set of indirect tax measures in the Union Budget 2026-27, aimed at further simplifying the tariff structure, support domestic manufacturing, promote export competitiveness, and correct inversion in duty.

Finance Minister Sitharaman presented her record ninth consecutive Union budget today in the Parliament.

On Thursday, Union Finance Minister Nirmala Sitharaman tabled the Economic Survey of India in Parliament for the financial year 2025-26.

The tabling of the Economic Survey ahead of the Budget follows the long-standing tradition of outlining the state of the economy before detailing future fiscal plans. The document provided a comprehensive, data-backed review of the economy's performance over the previous year and offers a broad roadmap for future policy direction. As the government's flagship annual report, it reviews key economic developments over the past 12 months.

India's real GDP growth for 2026-27 is projected in the range of 6.8-7.2 per cent, reflecting sustained medium-term growth capacity amid a challenging global environment.

- ANI

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Reader Comments

P
Priya S
Good for big tech, but what about the common man? I hope this leads to cheaper cloud storage and better internet services for us regular consumers. Also, the condition to use an Indian reseller is smart - it will boost our local IT services sector.
R
Rohit P
Data sovereignty is crucial. While attracting investment is good, we must ensure strict data protection laws are in place. We don't want a repeat of data privacy issues seen elsewhere. The policy needs strong regulatory oversight.
S
Sarah B
As someone working in tech, this is huge! The 15% safe harbour on cost for related entities is a technical but very important detail. It will make it viable for multinationals to set up their entire cloud infrastructure here. Big win for 'Make in India' for digital services.
V
Vikram M
The focus on electronic manufacturing logistics and toll manufacturing is the unsung hero here. Reducing costs for component warehousing to 0.7% tax is a masterstroke to compete with Vietnam and China. This budget seems to have a solid plan for holistic manufacturing growth.
K
Karthik V
With respect, I have a concern. A tax holiday till 2047 is an extremely long commitment. What if global tax norms change drastically? While the intent is good, such long-term concessions can sometimes tie the government's hands in future budgets. Hope there are review clauses.
M

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