The Union Budget 2026 has announced a set of measures to bring global enterprises, overseas investors and non-resident professionals to India recognising the urgency of building a strong digital and industrial base.
Covering sectors such as cloud services, data centres, electronics manufacturing and artificial intelligence, the proposals seek to position India as an attractive hub for cross-border business along with easing tax-related concerns for foreign entities.
As Sitharaman presented her ninth budget, she focused on Artificial Intelligence (AI), semiconductor manufacturing and digital infrastructure as key growth drivers, supported by targeted tax, customs and fiscal reforms.
FM said the government has chosen “reform over rhetoric” and “action over ambivalence,” claiming that India must deepen its global integration even as it strengthens economic resilience in an uncertain global environment.
Safe harbour norms to reduce tax uncertainty
To support the data centre ecosystem, the finance minister proposed a safe harbour of 15% on costs where a company providing data centre services from India is a related entity. This is focused at bringing certainty to transfer pricing and enabling efficiencies, particularly for companies operating integrated global supply chains.
The government announced a 2% profit margin safe harbour for non-residents undertaking component warehousing in bonded warehouses. This would result in an effective tax incidence of about 0.7%, which is lower than competing jurisdictions and is expected to help scale electronics manufacturing and just-in-time supply chains in India.
The government will also raise the safe harbour threshold for IT services to Rs 2,000 crore, introduce an automatic approval mechanism without officer interface, and prescribe a uniform 15.5% safe harbour margin for all IT services, giving clarity to multinational technology firms operating in India.
The finance minister also proposed exempting the total income of eligible non-resident foreign companies arising from providing capital equipment and tooling to electronic goods manufacturers located in bonded areas.
On tax administration reforms, the finance minister proposed constituting a joint committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes to incorporate the requirements of Income Computation and Disclosure Standards directly into Indian Accounting Standards. This aims to reduce compliance gaps and align accounting and tax reporting for businesses operating in India.
Tax holiday until 2047
The Centre has proposed a tax holiday until 2047 for foreign cloud companies operating from data centres located in India. This is focused at positioning India as a global digital infrastructure hub and encouraging companies to expand local data storage and processing capacities.
Announcing the measure, Union Finance Minister Nirmala Sitharaman said any foreign company offering cloud services to global customers through data centres based in India would be eligible for the tax holiday. However, such firms must route services to Indian customers through an Indian reseller entity.
“I propose providing a tax holiday until 2047 to any foreign company that offers cloud services to customers globally using data centres located in India. However, it will need to provide services to Indian customers through an Indian reseller entity,” the Finance Minister announced. From this the government’s intent to lower tax friction for global cloud players is clear along with focusing on local compliance and distribution layer for services delivered within India.
Relief for global experts and Non-Resident professionals
The Budget proposes exempting global, non-India-sourced income of non-resident experts for a stay period of five years under notified schemes with a focus on attracting global talent, this is likely to benefit foreign professionals, specialists and consultants contributing to India’s growing digital and manufacturing ecosystem.
Additionally, the government proposed exemption from minimum alternate tax (MAT) for all non-residents who pay tax on a presumptive basis, easing compliance for overseas entities and professionals.