EXEMPTION FROM MINIMUM ALTERNATE TAX (MAT) TO ALL NON-RESIDENTS WHO PAY TAX ON PRESUMPTIVE BASIS

TAX HOLIDAY TILL 2047 TO ANY FOREIGN COMPANY THAT PROVIDES CLOUD SERVICES TO CUSTOMERS GLOBALLY BY USING DATA CENTRE SERVICES FROM INDIA

SAFE HARBOUR OF 15 PERCENT ON COST IN CASE THE COMPANY PROVIDING DATA CENTRE SERVICES FROM INDIA IS A RELATED ENTITY

Recognising the need to enable critical infrastructure and boost investment in data centres, the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, while presenting the Union Budget 2026-27 in Parliament today, proposed to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India. It will, however, need to provide services to Indian customers through an Indian reseller entity.

The Union Budget also proposes to provide a safe harbour of 15 percent on cost in case the company providing data centre services from India is a related entity.

To harness the efficiency of just-in-time logistics for electronic manufacturing, the Union Finance Minister proposed in the budget to provide safe harbour to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value. The resultant tax of about 0.7 percent will be much lower than in competing jurisdictions.

The Union Finance Minister in order to provide fillip to toll manufacturing in India, has proposed in the Union budget 2026-27, to provide exemption from income tax for 5 years, to any non-resident who provides capital goods, equipment or tooling, to any toll manufacturer in a bonded zone.

The Budget proposals also provide exemption to global (non-India sourced) income of a non-resident expert, for a stay period of 5 years under notified schemes. This is intended to encourage vast pool of global talent to work in India for a longer period of time

The Union budget also proposes to provide exemption from Minimum Alternate Tax (MAT) to all non-residents who pay tax on presumptive basis.

 

Tax changes: tax holiday till 2047 for foreign cloud providers using Indian data centres; MAT exemption for presumptive non residents. Proposals grant a tax holiday until 2047 for foreign cloud providers using Indian data centre services if Indian customers are served via an Indian reseller, and a 15% safe harbour on cost where the data centre provider is related. Additional measures include a 2% profit safe harbour for non-resident component warehousing in bonded warehouses, a five-year income tax exemption for non-residents supplying capital goods to toll manufacturers in bonded zones, a five-year exemption for global income of non-resident experts under notified schemes, and MAT exemption for non-residents taxed on a presumptive basis.