Union Budget 2026 | Government to provide tax holiday for cloud and data centre firms till 2047

Bengaluru: In a major boost to foreign cloud companies, Finance Minister Nirmala Sitharaman has proposed to provide a tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from the country.

"It will, however, need to provide services to Indian customers through an Indian reseller entity," Sitharaman said during her Budget speech on Sunday.

Earlier, the Economic Survey 2025-26 highlighted huge growth opportunities in data centres. Despite generating nearly 20% of the world’s data, India hosts only about 3% of global data centres, around 150 out of 11,000 worldwide. This indicates a significant opportunity for the country in developing data centres.

Driven by surging data consumption, rapid cloud adoption, and the growing use of AI, India’s data centre capacity is projected to reach about 8 GW by 2030 from about 1.4GW as of Q2 of 2025.  The survey also stresses recognising data centres and cloud service providers as a distinct category, rather than classifying them as 'Commercial buildings' under the National Building Code, 2016, which does not account for their specialised design needs.

Also, FM announced that India is a global leader in software development services, IT-enabled services, knowledge process outsourcing services and contract R&D services relating to software development. "These business segments are quite interconnected with each other. All these services are proposed to be clubbed under a single category, Information Technology Services, with a common safe harbour margin of 15.5% applicable to all," she said.