Budget 2026: India Plans Tax Holiday to Lure Big Tech Data Centres
The Indian government is planning a major tax incentive for global cloud giants like Google, Microsoft, and Amazon to set up data centres in the country. The move, likely to be announced in the 2026-27 Union Budget, aims to position India as a global data hub.
Key Takeaways
- Tax Holiday: A 10-year tax break for foreign cloud providers building data centres in India.
- Timeline: The scheme is expected to run from April 2026 to March 2047.
- FDI Ease: A proposal for 100% automatic-route FDI in data centres is under consideration.
- Market Growth: India’s data centre market is projected to reach $10 billion by 2027.
Details of the Proposed Tax Incentive
According to sources, the government is considering a 10-year tax holiday specifically for foreign cloud service providers. This benefit would apply to both new data centre projects and the expansion of existing facilities.
“The government is considering a 10-year tax holiday for foreign cloud service providers that set up data centres in India. This is being done to attract investment in the data centre sector and to make India a global data centre hub,” the person said.
The policy is part of a broader strategy to attract investment. Incentives already exist for data centres in International Financial Services Centres (IFSCs).
Simplifying Foreign Investment
In a parallel move, the government is weighing a proposal to allow 100% Foreign Direct Investment (FDI) in data centres through the automatic route. Currently, while 100% FDI is permitted, it requires prior government approval.
Shifting to the automatic route would significantly streamline the process, making it faster and easier for international companies to invest.
Riding a Wave of Digital Growth
The push for data centres aligns with India’s explosive digital growth. Demand for data storage and processing is surging, driven by cloud adoption, 5G rollout, and nationwide digitalisation efforts.
A JLL report highlights this potential: the country’s data centre market is expected to more than double, growing from $4.5 billion in 2021 to $10 billion by 2027.
The proposed tax holiday, combined with easier FDI, could be the catalyst needed to transform India into a premier global data centre destination.
