At a glance
The Union Budget 2026 introduces a tax holiday until 2047 for foreign cloud providers using Indian data centers. This policy positions India as a primary global hub for digital infrastructure and AI workloads.
Executive overview
The Union Budget 2026 establishes a long-term fiscal framework to attract global hyperscalers. By offering a tax holiday and 15 percent safe harbour margins, the government aims to localize global data traffic. These measures address the rising demand for AI-ready infrastructure while ensuring domestic tax sovereignty through local resellers.
Core AI concept at work
Data center infrastructure refers to the physical facilities housing the specialized computing hardware required to process and store massive datasets. For artificial intelligence, these facilities utilize high-performance servers and GPUs to train complex models. The infrastructure provides the necessary power, cooling, and low-latency connectivity to sustain continuous, large-scale computational operations.
Key points
- Foreign companies providing global cloud services from Indian data centers are eligible for a tax holiday lasting until 2047.
- Global providers must serve domestic customers through an Indian reseller entity to maintain eligibility for the fiscal incentives.
- A 15 percent safe harbour margin on costs is established for related-party transactions to provide pricing certainty for international investors.
- The policy aims to scale India's data center capacity toward 10 GW to support intensive artificial intelligence and machine learning workloads.
Frequently Asked Questions (FAQs)
What are the eligibility requirements for the 2047 data center tax holiday?
Foreign companies must provide cloud services to global customers using infrastructure located within India to qualify for the incentive. Additionally, any services provided to the Indian domestic market must be routed through a registered local reseller entity.
How does the safe harbour margin impact international data center operators?
The 15 percent safe harbour margin on costs provides a predictable transfer pricing framework for companies operating through related Indian entities. This reduces the risk of protracted tax litigation and allows for more stable long-term capital expenditure planning in digital infrastructure.
FINAL TAKEAWAY
The 2026 budgetary provisions transform India's data center sector into a strategic national asset. By providing decades of fiscal certainty, the policy encourages massive capital inflows into the physical infrastructure required to sustain the next generation of global artificial intelligence and cloud services.
[The Billion Hopes Research Team shares the latest AI updates for learning and awareness. Various sources are used. All copyrights acknowledged. This is not a professional, financial, personal or medical advice. Please consult domain experts before making decisions. Feedback welcome!]
