India gives 20-year tax holiday to foreign firms using local data centers

NEW DELHI - India said on Sunday foreign companies using data centers built in the country to provide services to global clients will not face any taxes for doing so for more than 20 years, hoping to assuage concerns of possible tax liabilities on the sector.

Scores of data centres have been built in India in recent years, but lawyers told Reuters that foreign companies had been concerned that New Delhi could in future impose taxes on their global income for using a data centre located in the country.

Those concerns were set to rest by Finance Minister Nirmala Sitharaman in her 2026-27 budget speech, where she said India will "provide (a) tax holiday till 2047 to any foreign companies that provide cloud services to their customers globally, by using data centre services from India."

Vaibhav Gupta, partner at tax firm Dhruva Advisors, said: "This announcement helps in bringing clarity to foreign companies and lends stability in (their) tax position in India till 2047," noting foreign companies would no longer need to worry about potential taxes on their global income on the basis they use a data centre in India.

Google GOOGL.O said in October it will invest $15 billion in an AI data centre project in Andhra Pradesh state, while Microsoft MSFT.O and Amazon AMZN.O have poured billions into data centres in India. Indian conglomerates like Adani ADEL.NS and Reliance RELI.NS are also investing.

Amazon, Microsoft and Google did not immediately respond to requests for comment on the government's tax measure.

"Data centres will be a major strength for India through which we can provide new services to the world," IT minister Ashwini Vaishnav told reporters.

-Reporting by Aditi Shah in New Delhi and Dhwani Pandya in Mumbai; Additional reporting by Aditya Kalra in New Delhi, Haripriya Suresh, Sai Ishwar, Abhirami G in Bengaluru; Editing by David Holmes/Reuters