India has simplified its data centre tax regime with new amendments, aiming to attract more foreign cloud and AI infrastructure investments amid expanding domestic market prospects and ongoing infrastructure challenges.
India’s bid to become a magnet for cloud and AI infrastructure took another step forward after the Lok Sabha approved the Taxation and Other Laws (Amendment) Bill, 2026, a measure that simplifies the country’s new data centre tax incentive regime. The changes remove the need for separate government notifications for eligible foreign companies and Indian data centres, and extend the benefit to leased facilities, making the framework easier to use for global operators with more complex business structures.
The move follows the Union Budget 2026 proposal for a long-term tax holiday for foreign cloud providers using data centre infrastructure in India, a policy designed to give investors greater certainty and reduce compliance burdens. According to industry body Nasscom, the earlier approval process risked adding needless complexity, especially because the tax benefit is aimed at the foreign company while the Indian operator continues to pay tax on service income. The amended bill shifts the focus to statutory eligibility criteria rather than case-by-case approvals.
Executives across the sector say the reform should support demand for Indian capacity, particularly as hyperscalers and newer cloud players continue to drive large-scale build-outs. Sunil Gupta, chief executive of Yotta Data Services, said the structure should help boost demand for India-based sovereign cloud, GPU and AI infrastructure, while Sridhar Pinnapureddy, co-founder of CtrlS, said the changes improve India’s competitiveness but must be matched by faster approvals, dependable power supply and better infrastructure readiness. Industry estimates cited by analysts show Amazon, Microsoft and Google have already committed nearly $57bn to Indian capacity expansion, while the country’s public cloud market is forecast to rise from about $17bn in 2025 to $44bn by 2030, according to IDC.
Still, analysts caution that tax incentives alone will not decide where capital goes. Ashish Banerjee, senior principal analyst at Gartner, said power availability, high-density grid access, fibre connectivity and end-user demand will remain key determinants. He also pointed to the yet-to-be-notified compliance and reporting rules as a major unresolved issue, alongside questions over reseller structures and the allocation of income between Indian and overseas customers. In that context, the bill looks less like a final answer than a clearer route into a market that still needs supporting infrastructure to turn policy intent into investment.
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