Finance Minister Nirmala Sitharaman announced a tax holiday for cloud services that will maintain local data centres in the Union Budget of 2026. The tax hiatus has been announced for foreign companies till 2047, which will provide global cloud services while using Indian data centres.
Finance Minister Sitharaman said in her speech, "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. It will, however, need to provide services."
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Services to Indian customers must be routed via local entities
However, the companies will be needed to provide services to Indian customers through an Indian reseller entity, the Finance Minister announced.
FM Sitharaman said, "It will, however, need to provide services to Indian customers through an Indian reseller entity. 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.”
‘Tax holidays are not anything new’, says expert
Reacting to this announcement, industry expert Arka Saha told News Ei Samay, "Whatever has been known till now, tax holidays are not anything new. Previously, several state governments had provided such tax holidays. If the Union government gives such a holiday, it is expected to have positive results."
Saha added that broader infrastructure challenges, especially electricity costs, will play a decisive role in determining the success of the policy.
"Several other factors, like electricity, need to be kept in mind while planning the development of data centres. We will have to see how much the government plans to give relief in these sectors.”
