India’s government announced a 20-year tax exemption for global hyperscalers using data centers within the country, a strategic move aimed at attracting artificial intelligence and cloud computing investments. The policy was unveiled by Union Finance Minister Nirmala Sitharaman during the Union Budget 2026-27 presentation on , positioning India to become a more competitive hub for global data processing and AI workloads.
During her budget speech, Finance Minister Sitharaman detailed a proposal to grant a two-decade tax holiday for cloud services provided by a local developer, effective until 2047. The measure is designed to incentivize hyperscalers — large-scale cloud providers like Amazon Web Services, Microsoft Azure, and Google Cloud — to base their global delivery infrastructure in India. The government stated the policy will boost investment in data centers
and shift India’s role from a consumer of data services to a global provider.
According to Kumarmanglam Vijay, partner at legal firm JSA Advocates and Solicitors, foreign hyperscalers’ data center operations in India are currently considered a permanent establishment. The profits from these operations are taxed at a rate of 35% plus additional surcharges and cess. The new exemption effectively removes this significant tax burden for companies servicing global clients from India.
The tax holiday is expected to dramatically alter the economic landscape for data center operations in the region. Experts suggest that India’s already low infrastructure costs, combined with this tax incentive, will make it a significantly more attractive location than competing hubs such as Singapore, the UAE, and Ireland. This proposal will significantly increase the hyperscaler demand and major foreign firms will now find India a significantly cheaper base for global workloads,
Riaz Thingna, a partner at Grant Thornton Bharat, told CNBC.
The policy aims to accelerate growth in India’s data center market, which currently has a capacity of around 1.2 gigawatts but is projected to exceed 3 gigawatts within five years. This comes as global data center capacity is expected to nearly double from 103 GW to 200 GW by 2030, largely driven by the demands of AI. Anshuman Magazine, CEO at real estate consultancy CBRE, noted the move removes the single biggest friction point for global hyperscalers entering India
and predicted that global capital inflows will increase substantially.
The Indian government initiated this policy to enhance its position in the global AI race, where it has lagged behind the U.S. and China due to a lack of foundational models, domestic chip manufacturing, and large-scale data center capacity. By creating a favorable tax environment, the government intends to transform India from a “consumption market” into a “global cloud computing and AI computing hub,” according to Thingna.
The strategy draws parallels to the incentives that fueled India’s IT services boom in the early 2000s. S. Anjani Kumar, a partner at Deloitte India, suggested the policy will catalyze large-scale global investment, expand export revenues, and lead to long-term job and capability creation.
India’s advantages, including abundant land for large-scale facilities and a growing renewable energy sector to power them, further strengthen its appeal to data center developers.
While the announcement signals a major policy shift, specific details regarding implementation remain undisclosed. The exact eligibility criteria for companies to qualify for the 20-year tax exemption have not yet been published. Furthermore, while major players like Google have announced significant investments in India’s cloud infrastructure, specifics on local partnerships have not been shared. At the time of the announcement, Google and Microsoft had not yet responded to requests for comment on the new policy, and Amazon Web Services declined to comment.
The immediate next step is for the Indian government to release detailed guidelines for the new tax regime. Following this, the industry anticipates a surge in investment from both global hyperscalers and data center developers. Raju Vegesna, chairman at Indian data center developer Sify Technologies, called the tax holiday a positive sign for sustained, cost-effective capacity creation.
The policy is expected to trigger a wave of new data center construction and expansion projects across the country, increasing India’s share of the global cloud infrastructure market.
For organizations and individuals in the technology and investment sectors, the following steps are advisable:
- Monitor Policy Details: Technology executives and investors should closely monitor official government channels for the specific regulations and eligibility requirements related to the tax exemption.
- Re-evaluate Infrastructure Strategy: Global corporations that rely on large-scale cloud computing and AI should re-evaluate their data center and workload placement strategies to assess the potential cost benefits of moving operations to India.
- Assess Market Opportunities: Investors and infrastructure providers should analyze the Indian data center market for new opportunities spurred by the anticipated influx of foreign capital and demand from hyperscalers.
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