India Proposes Tax Holiday for Foreign Cloud Firms Using Local Data Centers until 2047
India's Finance Minister Nirmala Sitharaman has proposed a tax holiday for foreign cloud service companies using local data centers, lasting until 2047, to boost investment in the country's expanding data center sector. The initiative, which requires companies to serve Indian customers through local resellers, aims to attract $30 billion in investment as the sector is expected to grow significantly by 2030. Additionally, the Minimum Alternate Tax will be reduced from 15% to 14%, and other provisions for non-residents in warehousing and capital goods supply are included in the budget.
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Finance Minister Nirmala Sitharaman proposed a tax holiday until 2047 for foreign cloud service companies utilizing Indian data centers. This initiative aims to attract foreign investment in India's growing data center sector, which is projected to expand from approximately 1.28-1.4 GW in mid-2025 to over 8 GW by 2030, requiring $30 billion in investment.
Companies must provide services to Indian customers through an Indian reseller entity to qualify. Additionally, the Minimum Alternate Tax (MAT) will be reduced from 15% to 14%. The budget also includes provisions for non-residents in component warehousing and offers a five-year income tax exemption for non-residents supplying capital goods to toll manufacturers in bonded zones. The threshold for safe harbor for IT services will increase from Rs 300 crore to Rs 2,000 crore.
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