Measures aim to position India as a global hub for data centres, electronics manufacturing and high-value services.
01 Feb 2026 | 186 Views | By Autocar Professional Bureau
The Union Budget 2026-27 has unveiled a sweeping set of tax incentives aimed at attracting global cloud service providers, and electronics manufacturers. Presenting the Budget in Parliament on Tuesday, Finance Minister Nirmala Sitharaman announced a tax holiday until 2047 for any foreign company that provides cloud services to customers worldwide ...
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The Union Budget 2026-27 has unveiled a sweeping set of tax incentives aimed at attracting global cloud service providers, and electronics manufacturers. Presenting the Budget in Parliament on Tuesday, Finance Minister Nirmala Sitharaman announced a tax holiday until 2047 for any foreign company that provides cloud services to customers worldwide using data centre infrastructure located in India. Such companies, however, will be required to serve Indian customers through an Indian reseller entity.
The move is aimed at accelerating investments in large-scale data centres, a critical component of India’s digital infrastructure push, amid rising global demand for cloud computing, artificial intelligence and data storage.
To further improve tax certainty, the Budget proposes a safe harbour margin of 15% on cost for related-party transactions where data centre services are provided from India. This is expected to reduce transfer pricing disputes and improve the ease of doing business for multinational cloud and technology companies.
Push for Electronics Manufacturing and Logistics
In a bid to support just-in-time logistics for electronics manufacturing, the Budget also proposes a safe harbour regime for non-residents warehousing components in bonded warehouses in India. Under the proposal, profits will be presumed at 2% of invoice value, resulting in an effective tax incidence of around 0.7%, significantly lower than in several competing jurisdictions.
The government said this measure is intended to make India a more attractive base for global electronics supply chains by lowering costs and improving predictability for overseas suppliers.
To encourage toll manufacturing, the Budget has proposed a five-year income tax exemption for non-residents supplying capital goods, equipment or tooling to toll manufacturers operating in bonded zones.
The Finance Minister also announced a tax exemption to global (non-India sourced) income of a non-resident expert, for a stay period of 5 years under notified schemes. This is intended to encourage vast pool of global talent to work in India for a longer period of time.
In addition, all non-residents paying tax on a presumptive basis will be exempt from Minimum Alternate Tax (MAT), further simplifying tax compliance for overseas businesses operating in India.
The Budget also included relief measures for individuals. Any interest awarded by the Motor Accident Claims Tribunal to a natural person will now be fully exempt from income tax, and tax deducted at source (TDS) on such income will be removed.