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

Mumbai: The government said the tax holiday for foreign cloud firms will ensure investment certainty, boost digital infrastructure and strengthen India’s global digital value chain role.

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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