Union Finance Minister Nirmala Sitharaman, on February 1st, 2026, announced a 21-year tax holiday for foreign companies setting up data centres in India, until 2047. To bolster digital infrastructure and establish India as a global data hub, the Centre proposed a tax holiday until 2047 for foreign cloud firms using Indian data centres.
In a bid to attract more foreign investments and boost growth in the Information Technology and Artificial Intelligence space, the Union Finance Minister, Nirmala Sitharaman, announced a major tax holiday and a 15 per cent safe harbour with a threshold of Rs 2,000 crore, to foreign companies providing data centre and cloud infrastructure services in India.
Unveiling the announcement, Finance Minister Nirmala Sitharaman said, “I propose providing a tax holiday until 2047 to any foreign company that offers cloud services to customers globally using data centres located in India. However, it will need to provide services to Indian customers through an Indian reseller entity.” The measure is aimed at boosting India as a global digital infrastructure hub besides encouraging organisations to expand local data storage and internal capacities.
Recognising data centre and cloud infrastructure as critical infrastructure and attracting investments, in a press note tabled after the budget, the government identified that data centres, particularly providing AI solutions plays a critical role in the AI infrastructure.
According to the note, tabled, investments worth USD 70 billion are already underway, with the announcement of another USD 90 billion. The proposed tax holiday till 2047 will provide an additional impetus to long term investments for foreign companies providing cloud services. A safe harbour of 15 per cent on cost has also been proposed where the data centre service provider in India is a related entity.
Controlling 63 per cent of the global cloud infrastructure market as of Q3 2025, Cloud, Azure and AWS are now turning to India to establish data centres essential for sustaining their operations. While data centres are infamously capital resource oriented, requiring massive amounts of electricity, water and land to enable their overall operations, this announcement in the fiscal budget is supposed to control the market demands and important strategic asset for businesses.
This offer of a massive tax holiday is expected to help bridge the divide between generation and storage capacity, while also ensuring a boost to jobs and the economy.
Despite generating close to 20 per cent of global data, India accounts for only a limited share of worldwide data centre capacity. The February 1 announcement by the Union Government seeks to bridge this gap by positioning India as a long-term investment destination, at a time when AI-driven workloads are expected to absorb a substantial portion of global capacity in the next decade.
