In a bid to attract massive investments into its data center ecosystem, India’s Union Budget unveiled a groundbreaking tax holiday for foreign cloud service providers. But Wednesday’s Finance Ministry insights reveal four non-negotiable conditions that overseas firms must meet to unlock benefits spanning FY 2026-27 to 2046-47.
Eligible companies are those delivering cloud services globally, with a foothold in India. The policy shields their global revenues from Indian taxation when leveraging local data centers, provided they adhere to the rules.
Rule one: Secure government notification as a qualifying foreign entity. Rule two: Engage only Indian data center operators for services. Rule three: Ensure the data center holds MeitY notification status. Rule four: Deliver services to Indian customers via a resident reseller.
This clarity eliminates tax uncertainties that previously deterred multinationals. Local revenues—like data center billings or reseller sales—stay subject to standard corporate taxes.
For data centers acting as cost-plus arms of foreign parents, a generous 15% margin offers tax protection. Treatment remains uniform across ownership models, promoting fair competition.
Indian operators can now aggressively pitch to AWS, Google Cloud, and peers without fear of downstream tax liabilities for clients. The policy’s ripple effects promise accelerated colocation builds, fiber expansions, and talent upskilling.
Ultimately, these incentives form a cornerstone of India’s digital infrastructure ambitions, aiming to capture a slice of the $100 billion global data center pie while securing data sovereignty.
