The Union Budget 2026 proposed a tax holiday until 2047 for foreign companies that provide cloud services to customers globally, using data centres located in India, signalling the government’s push to make the country a major hub for AI and digital infrastructure.
The big push on data centres comes at a time when India is gearing up to take the centre stage in global discourse on Artificial Intelligence. It is expected to position India not just as a consumer of global cloud and AI services, but as a thriving base for the world’s digital backbone.
Presenting the Budget, Finance Minister Nirmala Sitharaman said: “Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India.” It will, however, need to provide services to Indian customers through an Indian reseller entity.
“I also propose to provide a safe harbour of 15% on cost in case the company providing data centre services from India is a related entity,” the FM said.
Why is it significant
By linking tax benefits to serving global customers from India, the policy seeks to turn the country into an export hub for cloud computing.
As AI, cloud computing, and digital payments grow, data centres are becoming as critical as roads and power plants, forming the backbone of India’s digital economy.
Sindhu Gangadharan, SAP Labs India and Chairperson, Nasscom, said the Budget strengthens the policy backbone required for India to operate as a global technology and AI execution hub.
“The focus on cloud infrastructure and long-term clarity for cloud services directly addresses a core constraint in scaling enterprise platforms, the ability to run regulated, data-intensive workloads with confidence and continuity,” Gangadharan said.
She added that for GCCs, this creates the conditions to move beyond delivery into ownership, where India increasingly designs, builds, and runs core platforms and mission-critical systems for global enterprises.
AI Impact Summit
The tax holiday announcement comes at a time when India is eyeing a leading role in global AI conversations, with New Delhi all set to host the India AI Impact Summit, the first-ever in the Global South.
The mega conference scheduled from February 16-20, 2026, at Bharat Mandapam, New Delhi, will mark the biggest congregation on AI in the world to date, bringing together 15 global leaders and Heads of State/Government, over 40 Ministers, 100s of leading CEOs and CXOs, and eminent academics from all over the world.
IT Minister Ashwini Vaishnaw noted earlier this week that investments worth nearly $70 billion are already flowing into the AI infrastructure layer, with the potential to double by the conclusion of the Summit.
Last year, big tech companies Microsoft and Google grabbed headlines as they collectively pledged billions of dollars in fresh capital to build out gigawatt-scale data centres and sovereign AI infrastructure in India.