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Budget 2026: Tax holiday till 2047 for firms setting up data centres in India
In her budget speech, Union finance minister Nirmala Sitharaman said that companies providing data centre services to their own group firms from India will get tax certainty
Union finance minister Nirmala Sitharaman on Sunday announced a tax holiday until 2047 for any foreign company that provides cloud services to customers globally by setting up data centres in India.
“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,” said Sitharaman in her budget speech.
She added that companies providing data centre services to their own group firms from India will get tax certainty, with the government allowing a fixed 15% profit margin over costs to be treated as acceptable, reducing the risk of transfer pricing disputes.
At a media briefing after the budget was presented, information technology and electronics minister Ashwini Vaishnaw said India has secured around $90 billion in pledged investments for AI-related infrastructure. He added that projects worth about $70 billion are already underway. Vaishnaw said that the total investments could double by the time the AI Impact Summit begins next month, and may soon reach $200 billion as more commitments come in.
“India will emerge as one of the world’s largest hubs for artificial intelligence. We already have the second-largest pool of AI talent globally and rank among the top three countries in the field,” said Vaishnaw. “We are also seeing a lot of interest from AI server manufacturers who want to manufacture in India... as well as a lot of interest in doing the ATMP for the AI chips in India. Eventually, we look at having our own AI chips.”
The current investments include Google’s $15 billion for an AI and data centre hub in Visakhapatnam, Microsoft’s $20.5 billion in cloud infrastructure, and Amazon’s $35 billion for AI, cloud, and data-related projects. The rest of the investment promises are from small data service providers based in India.
Microsoft India & South Asia president Puneet Chandok said long-term policy certainty recognises that digital infrastructure is now strategic national infrastructure. “As AI adoption accelerates across sectors, secure and resilient compute capacity will underpin public services, enterprise innovation, and long-term competitiveness,” he said.
“At Microsoft, our commitments in India closely align with this direction. We are expanding hyperscale cloud and AI infrastructure, including new regions, while continuing to invest in skilling at scale. Our efforts aim to support India’s transition from Digital Public Infrastructure to AI Public Infrastructure, enabling trusted, inclusive innovation with impact across the country.”
There was no immediate response from Google and Amazon to HT’s request for comments.
