Wedoany.com Report on Feb 7th, The Indian government recently introduced a significant incentive policy for international cloud service enterprises in its 2026-27 fiscal year budget. According to the budget documents, to attract foreign investment in building data center infrastructure, eligible foreign cloud service companies will enjoy a tax holiday of up to 20 years, with the policy expected to remain effective until 2047. This measure aims to reduce the global income tax risks faced by foreign enterprises operating data center businesses in India, thereby promoting India as a more attractive destination for digital infrastructure investment.
Finance Minister Nirmala Sitharaman stated in the budget report that this policy applies to overseas enterprises providing cloud services to global customers through data centers located in India. However, services targeting local Indian customers must still be provided through accredited Indian distributor entities. A senior Finance Ministry official interpreted this as: "Indian data centers can now more confidently support global cloud service entities, and these international companies will no longer worry about their global income incurring additional tax liabilities in India when using Indian data centers."
The policy sets four core eligibility conditions: First, the enterprise must be incorporated outside India and have a place of business in India. Second, data center operational services must be provided by an Indian domestic company. Third, the data center must obtain formal qualification certification from India's Ministry of Electronics and Information Technology. Fourth, services for local Indian customers must be conducted through Indian distributors.
Statistics show that between 2020 and 2024, nearly 350 foreign enterprises from various industries have completed legal registration in India. The Finance Ministry also clarified that all income derived from domestic economic activities in India—including revenue from data centers providing services to global entities and profits from distributors reselling cloud services to local customers—will still be taxed normally under India's current tax laws. For Indian data centers that are associated entities of foreign enterprises, their compliant profit margin will be subject to a 15% safe harbor standard.
Foreign cloud service providers will be treated equally, regardless of whether the data center is wholly owned by an Indian domestic entity or operates as a subsidiary of an international company, to ensure fairness in the market environment. This policy is seen as a key step for India to strengthen its digital sovereignty and build a regional data center hub, and is expected to further encourage international cloud service giants to expand their infrastructure footprint in India.
