India's 20-Year Tax Holiday: A Boost for Global Cloud Service Providers

India's budget proposal offers a 20-year tax holiday for foreign companies providing global cloud services, contingent on establishing a MeitY-notified data center in the country. This initiative aims to alleviate taxation concerns on global income and boost investment in Indian data centers, promoting a level-playing field.

India's government has announced a significant incentive for foreign companies offering cloud services globally by proposing a 20-year tax holiday. This benefit is accessible only to firms establishing a data center recognized by the Ministry of Electronics and Information Technology (MeitY) within India.

The Finance Ministry clarified that the tax break would alleviate concerns for foreign entities regarding taxation of their global income in India. The policy aims to instill confidence, encouraging global cloud services providers to partner with Indian data centers without fear of additional taxes.

Finance Minister Nirmala Sitharaman introduced this proposal in the 2026-27 Budget, projecting it as a catalyst for increased investment in India's burgeoning data center sector. The measure includes a safe harbour margin for affiliated Indian data centers, ensuring a level-playing field for both foreign-owned and local entities.

(With inputs from agencies.)