What Is A Tax Holiday? FM Nirmala Sitharaman Announces Scheme In Budget 2026 Valid Till 2047

In a significant move to strengthen India's digital services ecosystem, the Central government has announced major tax incentives for foreign cloud service providers in the Union Budget 2026.

The proposal aims to attract global technology companies to set up and expand data centres in India.

Union Finance Minister Nirmala Sitharaman made the announcement while presenting the Budget in Parliament, calling it a step towards making India a global digital infrastructure hub.

Tax Holiday Till 2047 for Foreign Cloud Firms

Under the new proposal, foreign companies offering cloud services to global customers will be eligible for a tax holiday until 2047, provided they use data centres located in India. However, such companies will be required to serve Indian customers through an Indian reseller entity.

The government said this condition will ensure that domestic businesses benefit from global cloud investments while maintaining regulatory oversight within the country.

Safe Harbour Rule for Data Centre Operations

In addition to the tax holiday, the Budget also proposed a 15 per cent safe harbour on costs for companies linked to Indian entities that operate data centres. This move is expected to provide clarity on taxation and reduce disputes, making India a more attractive destination for large-scale digital infrastructure investments.

Industry experts believe the safe harbour rule will offer greater certainty to multinational firms and encourage faster expansion of data centre capacity across the country.

Boost to India's Digital Infrastructure Ambitions

The government said these measures are aimed at positioning India as a preferred global destination for data storage, processing and cloud-based services. With rising demand for digital services worldwide, the incentives are expected to drive investment, create jobs and strengthen India's role in the global technology supply chain.

By encouraging companies to build and operate data centres locally, the policy also supports data localisation and enhances the country's digital resilience.

The Budget 2026 announcement marks one of the strongest policy signals yet from the government to attract long-term investments in India's digital and cloud computing ecosystem.