Union Budget 2026: Finance Minister Nirmala Sitharaman on Sunday announced a major incentive to attract global investment into India’s data centre ecosystem, proposing a tax holiday till 2047 for foreign companies providing cloud services worldwide using data centres located in India.
Presenting the Union Budget 2026-27 in Parliament, Sitharaman said eligible foreign firms will be required to serve Indian customers through an Indian reseller entity, ensuring domestic participation while supporting global operations.
Safe Harbour Norms For Data Centres And Electronics Logistics
To provide tax certainty, the Finance Minister proposed a safe harbour margin of 15 per cent on costs where data centre services are provided from India by related entities.
In a push to support electronics manufacturing and just-in-time logistics, Sitharaman also announced a safe harbour provision for non-resident warehousing of electronic components in bonded warehouses. The profit margin has been fixed at 2 per cent of invoice value, translating to an effective tax of around 0.7 per cent, significantly lower than rates in competing jurisdictions.
Five-Year Tax Exemption To Boost Toll Manufacturing
To strengthen India’s toll manufacturing ecosystem, the Budget proposed a five-year income tax exemption for non-residents supplying capital goods, equipment, or tooling to toll manufacturers operating in bonded zones. The move aims to attract advanced manufacturing capabilities and global supply chains into India.
Indirect Tax Reforms And Economic Outlook
The Finance Minister also unveiled a set of indirect tax measures to simplify the tariff structure, correct duty inversions, promote exports, and support domestic manufacturing.
Sitharaman presented her record ninth consecutive Union Budget in Parliament. Earlier this week, she tabled the Economic Survey for 2025-26, which projected India’s real GDP growth for 2026-27 at 6.8–7.2 per cent, underscoring the economy’s sustained medium-term growth potential despite global challenges.
(Via Agency Inputs)
