Cloud companies to get tax holiday till 2047: What does it mean for India?

New Delhi: Union Finance Minister Nirmala Sitharaman on Sunday announced a tax holiday till 2047 for foreign cloud service providers that use data centres located in India, in a major move aimed at boosting the country’s digital infrastructure and attracting long-term global investment.

Presenting the Union Budget 2026–27, Sitharaman said the incentive is designed to position India as a global hub for cloud computing, artificial intelligence and data-driven services.

What is the tax holiday and how will it help?

A tax holiday means eligible companies will be exempt from paying certain taxes for a fixed period. In this case, foreign cloud service providers that serve global customers using data centres based in India will enjoy tax benefits till 2047 — provided they route services to Indian customers through an Indian reseller entity.

“I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre,” Sitharaman said.

The move is expected to:

• Encourage global tech giants to set up large data centres in India
• Create jobs in construction, IT operations and digital services
• Strengthen India’s cloud, AI and cybersecurity ecosystem
• Reduce dependence on overseas data infrastructure
• Industry experts say the long-term certainty offered by the tax holiday makes India a far more attractive destination for large-scale digital investments.

Other key technology and policy announcements

The Finance Minister also announced that software development services, IT-enabled services, knowledge process outsourcing and contract R&D will now be grouped under a single category called “Information Technology Services.”

To simplify taxation, the Budget proposed:

• A common safe harbour margin of 15.5% for all IT services
• Raising the threshold for safe harbour eligibility from ₹300 crore to ₹2,000 crore
• Automated, rule-based approvals without tax officer scrutiny
• In addition, the processing time for Advanced Pricing Agreements (APAs) will be cut to two years, with faster approvals for multinational firms.

Beyond technology, the Budget announced the setting up of a National Institute of Hospitality, a second NIMHANS campus, protection of turtle nesting sites in coastal states, and extended tax benefits for cooperative societies.

The cloud services tax holiday, however, stands out as a major signal of India’s ambition to become a global powerhouse in digital infrastructure and next-generation technology services.