In her Budget 2026 speech delivered on February 1, Finance Minister Nirmala Sitharaman offered a significant policy win for global tech giants like Apple. International companies can now provide machinery to local contract manufacturers for up to five years without incurring additional tax liabilities.
Apple has been expanding its presence in India over the past few years as it looks to reduce its dependence on China. According to Counterpoint Research, the iPhone’s share of the Indian smartphone market has doubled to 8% since 2022. While China still accounts for 75% of global iPhone shipments, India’s share has jumped four times to 25% since 2022.
Why Apple wanted a change in tax rules
Apple had been urging the Indian government to change its income tax rules so that the company would not be taxed simply because it owns the expensive iPhone-making machines that it supplies to its contract manufacturers.
In India, unlike in China, Apple feared that paying for machines used by its contract manufacturers could be treated under Indian law as a “business connection,” which could lead to taxes on its iPhone sales profits. Because of this risk, Apple’s contract manufacturers, Foxconn and Tata, were forced to spend billions of dollars themselves on machinery, according to a report by Reuters.
On Sunday, FM Sitharaman said that “to promote manufacturing of electronic goods for a contract manufacturer”, India is making changes to the law to ensure that just owning machines in India does not result in taxes for a foreign company.
What the move means for future investments
This move could encourage Apple and other global companies to invest more quickly in electronics manufacturing in India by covering the high upfront cost of machines, easing the financial burden on their local contract manufacturing partners.
“We are saying that if you bring your machine, and that machine is used by a local manufacturer to produce something, we will exempt you for 5 years. We are giving them certainty,” Arvind Shrivastava, Revenue Secretary said at a post-budget press conference.
Boosting smartphone manufacturing is a major part of Prime Minister Narendra Modi’s plan to drive economic growth.
Who the new rule applies to
The rule change will remain in force until the 2030–31 tax year and will apply only to factories set up in customs-bonded areas. These areas are technically treated as being outside India’s customs border. If phones made in these factories are sold within India, they will face import duties, which means such facilities are mainly suitable for export-oriented production.
“Any income arising on account of providing capital goods, equipment or tooling to a contract manufacturer, being a company resident in India, is eligible for exemption,” the Indian government said in one of its explanatory budget documents.
The earlier tax rules did not affect Apple’s South Korean rival Samsung, as most of its phones in India are made at its own factories rather than by contract manufacturers.
