India is broadening its tax incentives for technology-heavy industries, offering longer exemptions and relaxed rules to attract more foreign investment into manufacturing, data centres, and AI-driven infrastructure, signalling a strategic push to deepen domestic supply chains and digital control.
India is broadening its tax incentives for technology-heavy industries in a bid to draw more global capital into manufacturing and digital infrastructure. According to Business Today, the new legislation would extend until March 31, 2041 the income-tax exemption available to foreign companies that use Indian contract manufacturers to produce specified electronic goods, giving investors a far longer planning horizon for large projects and supply-chain commitments.
The measure also offers a 15-year tax exemption for foreign companies storing electronic components in customs-bonded warehouses for supply to Indian contract manufacturers. Ashutosh Gupta, Director of Sales & Marketing at Summercool Home Appliances Ltd., told Business Today that the change gives the sector greater policy clarity and a more investment-friendly backdrop. He said that stronger incentives could gradually expand capacity, increase localisation of components and deepen the supplier base, with benefits extending into infrastructure, skilled jobs and domestic value chains. Naman Shah, Managing Director of LeSol Group, said the longer-term certainty should ease a major concern for overseas investors: predictability in the tax regime.
Data centres are also central to the reform. The Bill relaxes rules for foreign companies using Indian data centres by removing approval and notification requirements and allowing them to operate through leased infrastructure rather than direct ownership. India Briefing said Budget 2026–27 framed these measures as part of a wider effort to attract global capital into cloud computing, data centres, electronics manufacturing and AI-linked infrastructure, while improving policy certainty for businesses that depend on long-term investment cycles. TechCrunch and Livemint reported earlier this year that the government had already signalled unusually generous tax treatment for foreign cloud providers using Indian data centres, underlining how closely the policy push is tied to global AI demand.
Manoj Dhanda, Founder and Chief Executive of Utho Cloud, told Business Today that recognising leased infrastructure and removing procedural hurdles could speed up investment and help India deploy hyperscale data-centre capacity more quickly. He added, though, that the bigger strategic issue is not just physical capacity but control of the broader cloud stack, including compute, storage, networking and virtualisation. That leaves room for domestic cloud and infrastructure firms to benefit as well, even as foreign players expand. TaxGuru said the Budget also included broader safe harbour changes aimed at reducing disputes and providing certainty, especially for IT, data-centre and electronics-related activity.
Taken together, the measures point to a clear policy calculation: India wants to combine tax visibility with easier operating rules to bring in global firms while building more of the industrial and digital ecosystem at home. The real test will be whether the incentives translate into new factories, deeper local supply chains, faster data-centre build-outs and more domestic control over critical digital infrastructure.
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