Tax Bill proposes easier norms for data centres, incentives for electronics

Proposed amendments seek to simplify tax rules for data centres, improve ease of doing business and provide long-term certainty for electronics manufacturers and cloud firms

India’s data centres and electronics manufacturing could get a boost through the Taxation and Other Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on Tuesday, according to industry experts.

 

The new piece of legislation is expected to ease regulatory hurdles for global cloud companies and offer long-term tax certainty to foreign suppliers of capital equipment, they said.  

 

The changes in the Bill share a single purpose, which is to make India a more attractive and predictable place for global capital, manufacturing and business to come and stay, said a source in the finance ministry.

 

One of the key proposals is removing approval requirements for foreign cloud-service providers and Indian data-centre owners and operators to get tax exemption until 2047, a move aimed at creating a more conducive environment for the fast-growing sector.

 

The data-centre industry has been accorded “infrastructure” status and is attracting billions of dollars in investment.

 

Though the conditions proposed for removal have not yet been made public, people familiar with the matter said stringent requirements such as data centres having almost 750 Mw of capacity within a stipulated period and employing a certain number of people were likely to be done away with.

 

Himanshu Parekh, tax partner at KPMG India, explained that the conditions worked at three levels; the foreign companies to be notified, the specified data centre operated by the Indian entity to be notified and the data centre to be owned and operated by Indian companies. "The relaxation of these conditions will greatly benefit data centers and their foreign clients and facilitate their ease of doing business."

 

“The proposed Bill removes these approval requirements and, importantly, allows Indian data centres to be run on a leased basis rather than only under direct ownership. The result is a much larger and more flexible ecosystem of Indian data centres serving global cloud players. This reform is expected to help India build large ‘AI data cities’ and attract significant investment into them,” a source in the finance ministry said.

 

Recognising the need to enable critical infrastructure and boost investment in data centres, the Budget proposed this tax holiday to those who provide services to any part of the world outside India by procuring data-centre services in the country.

 

Information-technology industry body Nasscom welcomed the proposal, saying the shift from an approval-based process to a condition-based regime was a positive step.

 

“The revised proposal would help foreign cloud service providers and other foreign companies with workloads in India, including groups with GCC (global capability centres) operations. Their models may involve group entities, overseas resellers, Indian reseller arrangements, and cross-border customer servicing,” the body said in a press note.

 

Removing the requirement to notify foreign companies reduces the risk that tax certainty depends on the entity named in an approval, Nasscom said, adding that the better test is whether the statutory conditions are met.

 

“It also helps Indian data centre companies, as removing data centre notification reduces avoidable approval burden on the facility, while making Indian operated infrastructure easier for global customers to use,” it said in the press note.

 

Sunil Gupta, cofounder, chief executive officer and managing director, Yotta Data Services, said the government was making India an attractive global hub for cloud and artificial-intelligence (AI) infrastructure by removing case-by-case notification requirements.

 

“For operators such as Yotta, this can significantly increase global demand for India-based sovereign cloud, GPU (graphics processing unit) and AI infrastructure, and support India’s emergence as a major global AI compute destination,” Gupta said.

 

For electronics manufacturing, the Bill improves ease of doing business, strengthens supply-chain resilience, and encourages global technology and component companies to establish a deeper, long-term presence in the country, experts said.

 

“Including mobile phones, laptops, personal computers, tablets, servers and their key components under these measures will provide greater certainty and strengthen India’s contract and brand manufacturing ecosystem,” said Ashok Chandak, president, India Electronics and Semiconductor Association.

 

According to Ritika Loganey Gupta, GCC tax leader, EY India, the proposed amendments reflect a pragmatic evolution of India’s tax framework to better align with the commercial realities of digital infrastructure. Moving away from ownership-based conditions and recognising leased infrastructure addresses a key operational constraint for global cloud service providers.