Tax holiday for data centre to a foreign company to be subject to four conditions

Any foreign company offering cloud companies via a data centre in India will get tax exemption, subject to assembly four conditions, Finance Ministry sources stated on Wednesday.

Finance Minister Nirmala Sitharaman, in her Finances speech, stated, “Recognising the necessity to allow essential infrastructure and increase funding in data centres, I suggest to present a tax holiday until 2047 to any foreign company that gives cloud companies to prospects globally by utilizing data centre companies from India. It’s going to, nonetheless, want to present companies to Indian prospects via an Indian reseller entity.”

She additionally proposed offering a secure harbour margin of 15 per cent on prices in case the company offering data centre companies from India is a associated entity.

Key conditions

In accordance to sources, Finances 2026-27 provides a tax exemption to a foreign company that gives cloud companies globally, together with in India. The exemption will be obtainable from tax yr 2026-27 onwards until tax yr 2046-47. They listed four important conditions for the foreign company. “First is that the foreign company should be notified. Second, the data centre company in India from which companies are taken should be an Indian company. Third, the data centre should be notified by MeitY. Fourth, the companies by the foreign company to Indian customers should be supplied via an Indian reseller entity, being an Indian company,” a supply stated.

“The four conditions are a consolation letter, not an incentive. Eire and Singapore already don’t tax these corporations meaningfully. India is providing parity, not benefit,” stated Piyush Prakashchandra Somani, Promoter, Managing Director and Chairman, ESDS Software program Resolution Restricted, an Indian cloud service supplier.

Tax certainty

Additional, the exemption supplies certainty to foreign corporations engaged in offering cloud companies and procuring companies from a data centre in India. There’ll be no danger for such foreign corporations having their world earnings taxed in India on this account. “As an alternative of constructing resellers and opening your complete Indian market, sure sectors (these necessary from a nationwide safety perspective) ought to be 100 per cent reserved for Indian Cloud suppliers solely. This permits Indian Cloud suppliers to improve their capability and compete, else total nations danger turning into a reseller financial system,” stated Abhishek Bhatt, Secretary Normal of Bharat Digital Infrastructure Affiliation, an trade physique representing native data centre gamers.

“The earnings on the earnings from home financial actions, that’s, data centre companies to the worldwide entity by the resident data centre, and resale of cloud companies to Indian prospects by the resident reseller entity, will stay taxable as every other home company,” one other supply stated whereas clarifying the place the Indian data centre is a associated entity of foreign company (price plus centre), secure harbour margin of 15 per cent is supplied. The remedy of foreign cloud service entities is similar whether or not the data centre is Indian owned or a subsidiary of the worldwide entity.

“So, there may be a full degree enjoying discipline. Now, Indian data centres can confidently provide their companies to world cloud entities, with out the latter perceiving any tax danger in the event that they use Indian data centres,” the primary supply stated.

Revealed on February 4, 2026