Union Finance Minister Nirmala Sitharaman announced a tax holiday till 2047 for foreign cloud service providers that serve global customers using data centres based in India, as the government seeks to position the country as a hub for global cloud and data centre infrastructure, as part of the Union Budget 2026.
She further proposed a series of tax incentives to attract global investment into India’s data centres, cloud services, electronics manufacturing, and talent ecosystem.
“Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide a tax holiday till 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. However, such companies will be required to serve Indian customers through an Indian reseller entity.
To address transfer pricing concerns, the finance minister also proposed a safe harbour regime. “I also propose to provide a safe harbour of 15% on cost in case the company providing data centre services from India is a related entity,” she said.
Safe Harbour Rules under Section 92CB of the Income Tax Act provide automatic acceptance by tax authorities for certain international transactions (like IT/ITES, R&D, etc) to reduce transfer pricing disputes and audits.
Notably, Google last year announced a $15 billion investment for its first AI hub in India and a gigawatt-scale data centre campus in Visakhapatnam, Andhra Pradesh.
Microsoft announced a $17.5 billion investment for AI infrastructure, including its largest data centre region in Hyderabad, to be launched in 2026. It also plans to expand its existing data centre infrastructure in Chennai, Mumbai, and Pune.
Amazon Web Services (AWS) announced a $12.7 billion investment in India in May 2023 to expand its cloud infrastructure through 2030.
As India rapidly digitalises and increasingly utilises AI, data centres are emerging as a vital, yet energy-intensive, component of the nation’s infrastructure.
The country currently generates nearly 20% of the world’s data but hosts only about 3% of global data centres, translating to approximately 150 out of 11,000 worldwide, according to Nasscom. This gap underscores a massive growth opportunity and a competitiveness challenge.
India’s installed data centre capacity is projected to surge significantly, growing from about 1.4 GW as of Q2 of 2025 to roughly 8 GW by 2030, according to the Economic Survey. This expansion is fueled by surging data consumption, rapid cloud adoption, and the growing use of AI, IoT, and 5G technologies.
The Budget also sought to attract global professionals to work in India for longer durations. “To encourage a vast pool of global talent to work in India for a longer period of time, I propose to provide exemption to global non-India sourced income of a non-resident expert for a stay period of five years, under notified schemes,” Sitharaman said.
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