Budget 2026 offers foreign cloud service firms a tax holiday till 2047 if they provide services from India via reseller, aiming to boost data centre investment and tech growth.
Budget 2026 offers foreign cloud service firms a tax holiday till 2047 [Photo: X]
As the Union Budget 2026-27 takes shape, the Indian government has unveiled a bold plan to attract global cloud computing giants into the country. Under this proposal, foreign companies providing cloud services from Indian infrastructure may receive an extended tax holiday up to 2047, provided they supply these services to Indian customers through authorised resellers. This move is designed to amplify India’s position as a global technology and data hub, accelerate digital adoption, and boost local innovation.
This approach marks a significant shift in tax policy, one that aligns with broader efforts to draw long-term foreign investment in digital infrastructure, make India a preferred cloud services base and create a more competitive ecosystem for both multinational and domestic tech firms.
Under the proposed Budget 2026 framework, eligible foreign cloud companies that set up operations and provide cloud services from India will be eligible for a comprehensive tax holiday extended all the way to 2047. The condition tied to this benefit is that foreign firms must provide services to Indian customers through local resellers or partners, ensuring both compliance and domestic engagement.
While the precise legal wording is expected to be finalised in post-Budget legislation, the intention is clear: long-term fiscal incentives will encourage global players to invest in Indian cloud infrastructure, data centres, and AI platforms.
The industry has already voiced related demands ahead of the budget. Bodies like Nasscom have urged the government for clarity on how cross-border digital activities are taxed, particularly the tax treatment of cloud operations relying on Indian data centres and co-location functions.
This extended tax holiday could reshape India’s technology landscape in several ways:
India has seen a surge in data centre investment from global tech giants. Clear long-term tax benefits would further enhance this trend, lowering the cost of capital and making India a more attractive destination for large compute and storage facilities.
Foreign cloud providers often operate via complex digital delivery models. By offering a predictable tax regime, India could attract more of these companies to host services locally, contributing to domestic infrastructure growth and jobs.
Cloud services underpin emerging technologies like AI, machine learning, big data and IoT. A stable, long-term tax holiday will boost confidence among investors and start-ups, accelerating innovation across sectors.
For Indian resellers and cloud partners, this policy could be transformative. By acting as authorised distributors of foreign cloud services, local firms may benefit from:
Industry lobbying before the Budget also highlighted that clearer tax rules for cloud services can reduce litigation and compliance costs for digital companies, further supporting domestic tech expansion.
Even before the Budget speech was delivered, India’s tech industry outlined key priorities for the 2026-27 budget cycle. These include:
The proposed tax holiday is consistent with these expectations and reflects the government’s recognition of cloud and digital services as crucial engines of future economic growth.
While Budget 2026 proposes the tax holiday concept, the detailed legal framework and eligibility criteria are likely to be outlined in subsequent legislative amendments or Finance Act provisions. Companies and industry bodies will watch closely for language on definitions, especially what constitutes “cloud services provided from India,” and the specifics around reseller partnerships and permanent establishment criteria.
If enacted with clarity and simplicity, this tax holiday could encourage a wave of fresh foreign investment, deepen India’s digital infrastructure, and strengthen its role in global cloud and IT services markets.
