Budget 2026–27: Tax holiday for foreign cloud companies signals AI infrastructure push

The Union Budget 2026–27 proposes a tax holiday till 2047 for foreign cloud companies using data centres in India to serve global customers. The move aims to attract investment, boost data centre capacity and position India as a global AI and digital infrastructure hub.

New Delhi: The Union Budget on Sunday proposed a tax holiday till 2047 for foreign companies that provide cloud services to customers globally using data centres located in India, signalling the government’s push to make the country a major hub for AI and digital infrastructure.

The big push on data centres comes at a time when India is gearing up to take the centrestage in global discourse on Artificial Intelligence. It is expected to position India not just as a consumer of global cloud and AI services, but as a thriving base for the world’s digital backbone.

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By linking tax benefits to serving global customers from India, the policy seeks to turn the country into an export hub for cloud computing.

Presenting the Union Budget 2026-27, Finance Minister Nirmala Sitharaman said: “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.”

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 per cent on cost in case the company providing data centre services from India is a related entity,” the FM said.

Put simply, data centres are secure facilities filled with powerful computers and servers that store, process and transmit digital data behind services ranging from emails and banking all the way to streaming and cloud platforms.

The data centres, which resemble fortified bases, run on specialised infrastructure, from uninterrupted power supply to advanced cooling and round-the-clock monitoring (even one minute of downtime can affect millions of users).

With AI, cloud computing and digital payments growing, data centres are becoming as critical as roads and power plants, forming the backbone of India’s digital economy.

India is eyeing a leading role in global AI conversations, with New Delhi all set to host the India AI Impact Summit, the first-ever in the Global South.

The mega conference scheduled from February 16–20, 2026, at Bharat Mandapam, New Delhi, will mark the biggest congregation on AI in the world to date, bringing together 15 global leaders and Heads of State/Government, over 40 Ministers, 100s of leading CEOs and CXOs, and eminent academics from all over the world.

IT Minister Ashwini Vaishnaw, earlier this week, noted that investments worth nearly USD 70 billion are already flowing into the AI infrastructure layer, with the potential to double by the conclusion of the Summit.