"The country's 2026 Union Budget offers a complete tax holiday lasting until 2047 for foreign AI and cloud providers that route their global services through Indian data centers. The sweeping policy shift aims to transform India into a dominant data center hub while fueling the nation's ambitious $3 trillion digital economy target. By pairing zero taxation with subsidized computing power from the IndiaAI Mission, the budget eliminates cost barriers for high-end AI innovation at a scale most nations can't match."
"Foreign companies must route all services to Indian customers through an Indian reseller entity. This structural mandate forces global tech giants to establish local partnerships rather than serving the Indian market directly-a significant operational shift that fundamentally changes how companies like AWS, Microsoft Azure, and Google Cloud would operate in the region. In practice, this means AWS can't simply flip a switch and serve Indian customers from existing infrastructure-they need an Indian partner entity processing every transaction."
"The policy pairs this requirement with a 15% safe-harbor provision for related-party services, creating a compliance pathway that simplifies what would otherwise be complex tax documentation for internal charges between corporate entities. This dual strategy removes regulatory uncertainty while incentivizing foreign providers to process sensitive data within Indian borders, addressing Digital Personal Data Protection Act compliance concerns that previously created friction."
The 2026 Union Budget grants a complete tax holiday through 2047 for foreign AI and cloud providers routing global services via Indian data centers. The measure combines zero taxation with subsidized computing power from the IndiaAI Mission to lower costs for large-scale AI deployment. Foreign firms must route services to Indian customers through local reseller entities, forcing partnerships rather than direct service models. A 15% safe-harbor for related-party services simplifies compliance for internal charges. The framework aims to accelerate investment, expand capacity, increase enterprise cloud adoption, and address data protection compliance by incentivizing local data processing.
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