New Delhi’s latest budget has sparked excitement among global tech giants with its promise of a 20-year tax holiday for data and cloud center operations. However, foreign companies eyeing this lucrative incentive must navigate four strict eligibility criteria, as clarified by Finance Ministry officials on Wednesday.
The relief, effective from fiscal year 2026-27 through 2046-47, targets foreign entities providing cloud services worldwide, including in India. Sources emphasize that only notified foreign companies partnering with Indian data centers will qualify.
First, the foreign firm must be officially notified under the scheme. Second, it must source data center services exclusively from Indian-registered providers. Third, these data centers need certification from the Ministry of Electronics and Information Technology (MeitY). Finally, services to Indian users must route through a domestic reseller entity.
This framework ensures certainty for global cloud providers using Indian infrastructure. They face no risk of their worldwide income being taxed in India, a major deterrent lifted by this policy.
Domestic earnings, such as fees from resident data centers to global units or sales by local resellers to Indian clients, remain taxable like any other business income. A safety net exists for affiliated data centers: a 15% safe harbor margin on costs.
Whether independently owned or subsidiaries of foreign giants, Indian data centers now offer level-playing field services without tax overhangs for clients. This boosts investor confidence, spurring infrastructure growth and positioning India as a data hub.
The move aligns with national goals to supercharge digital economy investments, drawing hyperscalers and fostering job creation in high-tech sectors. As negotiations heat up, compliance with these conditions will separate winners from spectators in India’s booming cloud market.