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Union Finance Minister Nirmala Sitharaman on Sunday unveiled a series of measures in the Union Budget 2026-27 aimed at strengthening India’s data centre ecosystem and promoting investment in critical infrastructure.

Recognising the strategic importance of data centres, FM Sitharaman proposed a tax holiday until 2047 for any foreign company providing cloud services globally using data centre services from India. However, these companies must serve Indian customers through an Indian reseller entity, she clarified while presenting the Budget in Parliament.

A tax holiday is a temporary government incentive that reduces or eliminates specific taxes—such as corporate income tax, property tax, or sales tax—for a defined period. Designed to stimulate economic activity, it encourages investment in new industries, supports startups, or boosts consumer spending by lowering tax burdens.

The Finance Minister also announced a 15 per cent safe harbour on costs for companies providing data centre services from India through related entities.

To boost efficiency in electronic manufacturing, she proposed a safe harbour for non-resident warehousing components in bonded warehouses, allowing a profit margin of 2 per cent of the invoice value.

FM Sitharaman noted that the resulting tax of around 0.7 per cent would be significantly lower than competing jurisdictions.

Further, to encourage toll manufacturing in India, non-residents providing capital goods, equipment, or tooling to toll manufacturers in bonded zones will be exempt from income tax for five years.

On the indirect tax front, Sitharaman announced measures to simplify the tariff structure, support domestic manufacturing, enhance export competitiveness, and address duty inversion.

This marks her ninth consecutive Union Budget, presented today in Parliament.

Ahead of the Budget, on Thursday, Sitharaman tabled the Economic Survey of India 2025-26, following the tradition of reviewing the state of the economy before laying out future fiscal plans. The survey offered a data-backed analysis of the economy’s performance over the past year and provided a roadmap for future policy.

India’s real GDP growth for 2026-27 is projected at 6.8–7.2 per cent, reflecting a sustained medium-term growth capacity amid a challenging global environment.

With agency inputs