Union Budget 2026: India Announces 20-Year Tax Holiday for Foreign Cloud Companies Until 2047

Union Budget 2026: India Offers 20-Year Tax Holiday to Foreign Cloud Firms to Boost Digital Infrastructure In the Union Budget 2026-27, Finance Minister Nirmala Sitharaman announced a landmark tax reform aimed at strengthening India’s digital and cloud infrastructure. Under the new proposal, foreign companies providing cloud services globally through Indian data centres will receive a tax holiday until 2047 — a move strategically designed to attract global investment and position India as a major hub for cloud, AI, and data services. What the Tax Holiday Means Under the policy: Foreign cloud providers that use data centres located in India to serve customers worldwide will be exempt from income tax on related earnings until 31 March 2047. To ensure compliance with domestic regulation, services offered to Indian users must be routed through an Indian reseller entity. A 15 % safe harbour margin has been proposed for related party arrangements, giving multinational tech companies greater certainty in transfer pricing. This long-term tax incentive reflects the government’s intent to boost India’s data centre capacity, support AI development, and draw global cloud operations to Indian soil — a significant step toward building a robust digital infrastructure ecosystem. Why It Matters Industry analysts say this innovative policy could: Encourage major global cloud providers — such as AWS, Microsoft Azure, and Google Cloud — to expand their Indian infrastructure footprint. Increase foreign direct investment into India’s tech and digital sectors. Accelerate deployment of high-performance computing and AI workloads locally, strengthening India’s competitiveness in the global digital economy. This tax holiday is seen as a pivotal step in making India a preferred destination for data hosting, cloud operations, and digital services on the world stage.