India has taken a decisive step to cement its position in the global cloud and data infrastructure race, announcing that foreign companies using data centers located in the country to serve customers worldwide will not be taxed on their global income for more than two decades.
The policy, unveiled as part of the 2026–27 federal budget, is designed to remove a major source of regulatory uncertainty that had quietly worried multinational technology firms, even as they invested billions of dollars in India’s fast-growing digital infrastructure.
Finance Minister Nirmala Sitharaman used her budget speech to deliver the assurance, saying India would “provide a tax holiday till 2047 to any foreign companies that provide cloud services to their customers globally, by using data center services from India.” The move effectively guarantees that merely hosting or routing global cloud services through Indian data centers will not create future tax liabilities on overseas income.
Register for Tekedia Mini-MBA edition 19 (Feb 9 – May 2, 2026).
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab.
The announcement addresses a long-standing concern among foreign firms that New Delhi could, at some point, interpret tax rules in a way that treats the use of Indian-based data centers as establishing a taxable presence. Such fears had persisted despite India’s push to attract global technology capital and despite repeated assurances that the country wants to be seen as a stable, predictable destination for long-term digital infrastructure investment.
Vaibhav Gupta, a partner at tax advisory firm Dhruva Advisors, said the measure provides clarity and long-term stability. According to him, foreign companies no longer need to worry that their global revenues could be brought into India’s tax net simply because they rely on data center capacity in the country. By extending the assurance until 2047, the government is offering a time horizon that aligns with the lifespan of large-scale data center investments, which typically span decades.
India’s data center sector has expanded rapidly in recent years, driven by rising domestic demand for digital services and by global companies seeking alternative hubs outside China and traditional markets such as Singapore. Dozens of hyperscale and colocation data centers have been built or are under construction across states, including Maharashtra, Tamil Nadu, Telangana, and Andhra Pradesh, supported by improving power availability, expanding fiber-optic networks, and state-level incentive packages.
Global technology giants have already made major commitments. Google said in October it would invest $15 billion in an artificial intelligence-focused data center project in Andhra Pradesh. Microsoft and Amazon have poured billions of dollars into expanding their cloud and data infrastructure footprint in India, while domestic conglomerates such as Reliance Industries and the Adani Group have also stepped up investments, betting on long-term growth in cloud computing, AI, fintech, and streaming services.
Yet despite this momentum, lawyers told Reuters that uncertainty around future tax treatment had remained a quiet but persistent concern, particularly for companies using Indian facilities to serve customers entirely outside the country. The new tax holiday is intended to eliminate that risk and make India more competitive against rival data center hubs in Southeast Asia, the Middle East, and Europe.
Information Technology Minister Ashwini Vaishnav framed the policy as part of a broader national strategy.
“Data centers will be a major strength for India through which we can provide new services to the world,” he told reporters, signaling that the government views digital infrastructure as an export platform, not just a domestic enabler.
The move comes as global demand for data center capacity is surging as artificial intelligence, cloud computing, and data-intensive applications expand at a rapid pace. At the same time, companies are grappling with rising costs, power constraints, and regulatory bottlenecks in traditional data center locations. India is seeking to position itself as a cost-effective alternative, with a large talent pool, growing renewable energy capacity, and now, long-term tax certainty.
By extending the tax holiday to 2047, the centenary of India’s independence, the government is also making a symbolic statement about policy continuity. Analysts say the assurance reduces regulatory risk and could accelerate the next wave of investments, particularly in AI and high-performance computing, where firms require predictable operating conditions over long periods.
While Google, Microsoft, and Amazon did not immediately comment on the announcement, industry watchers say the policy could tilt future investment decisions in India’s favor, especially as companies reassess where to locate energy-hungry computing infrastructure. The move also complements India’s broader efforts to promote green data centers, with several states offering incentives for renewable-powered facilities as scrutiny grows over the carbon footprint of global computing.
In effect, New Delhi is trading potential future tax revenue for deeper integration into the global digital economy. By anchoring cloud infrastructure and data processing within its borders, India hopes to capture spillover benefits in jobs, skills, innovation, and exports. If the strategy succeeds, data centers could emerge as a core pillar of India’s growth story in the digital age, much as manufacturing was for earlier generations of emerging economies.