Budget 2026-27 Proposes Tax Holiday Till 2047 For Foreign Cloud Services Using Indian Data Centres

Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026–27, proposed a long-term tax holiday for foreign companies providing cloud services from India using domestic data centre infrastructure.

Announcing the measure in her Budget speech, the Finance Minister said, “Recognising the need to enable critical infrastructure and boost investment in data centers, I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data center services from India. 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 the data center services from India is a related entity.”

As per the proposal, foreign cloud service providers seeking to avail the tax holiday will be required to use data centre services located in India. Services to Indian customers must be routed through an Indian reseller.

Under the Finance Bill, 2026, the proposed tax exemption will run until March 31, 2047, giving foreign cloud companies long-term certainty to operate their global service delivery from India. The Bill also proposes a safe harbour margin of 15 per cent on costs where data centre services are provided by a related Indian entity.

The provisions are proposed to take effect from April 1, 2026 and will apply from the 2026–27 tax year onwards, subject to the passage of the Finance Act, 2026.

A “specified data centre” has been defined as one that is owned and operated by an Indian company and set up under a scheme approved and notified by the Ministry of Electronics and Information Technology.