India cloud tax holiday 2047 for data centres: prep by 31 March 2027

Summary. India's tax holiday to 2047 for foreign cloud companies that use Indian data centres is law, not a proposal. Announced in the Union Budget on 1 February 2026, it was enacted by section 124 of the Finance Act, 2026 as serial number 13C of Schedule IV to the Income-tax Act, 2025, in force from 1 April 2026. It exempts a foreign company's income arising, or deemed to arise, in India from procuring data centre services from a specified data centre, up to the tax year ending 31 March 2047. The company must own or operate none of the facility's infrastructure, must sell to users in India only through an Indian reseller company, and must furnish prescribed information. The Taxation and Other Laws (Amendment) Act, 2026, assented on 17 August 2026, dropped the government notification steps and allowed leased facilities, with effect from 1 April 2026. CBDT says a 15% safe harbour on cost applies where the Indian data centre is a related party. The rules that set the data centre conditions and the reporting form were not found on 7 November 2026. Tax year 2026-27, the first year of the exemption, closes on 31 March 2027. Buyers should map who bills them; operators should document ownership or leases.

About this article. This is for CFOs, tax and procurement teams at Indian cloud buyers, and for data centre operators and the India finance teams of foreign cloud providers. We read the statutory text itself: the Finance Act, 2026 (Act No. 4 of 2026) as published in the Gazette of India on 30 March 2026, and the Taxation and Other Laws (Amendment) Act, 2026 (Act No. 21 of 2026) as published on 17 August 2026, alongside the Finance Bill memorandum, PRS Legislative Research and CBDT's FAQs, checked on 7 November 2026. CBDT's website refused our automated requests, so we read its FAQ from an archived copy dated 27 August 2026 and did not read the Income-tax Rules, 2026 directly. This is not legal or tax advice; speak to a qualified adviser before acting. No vendor paid for inclusion. Researched with AI assistance and reviewed by our editorial team.

From Budget proposal to law: the timeline

The item has moved twice through Parliament since the Budget. The dates below come from PIB, the Finance Bill, the two Gazette texts, and PRS.

One terminology point. The Income-tax Act, 2025 came into force on 1 April 2026 and uses a single tax year, the twelve months of the financial year starting 1 April, in place of the old assessment year and previous year. Tax year 2026-27 therefore runs from 1 April 2026 to 31 March 2027. The window from 2026-27 to 2046-47 covers 21 tax years (2046 minus 2026, plus 1).

What serial number 13C says now

Schedule IV, read with section 11 of the Income-tax Act, 2025, lists income left out of the total income of named non-residents and foreign companies. Serial number 13C has four columns: the number, the income, the eligible person and the conditions. The table paraphrases the text in the Finance Act, 2026 and the August amendment, both read in the Gazette.

The definitions in Note 3

Note 3 below the table defines three terms for 13C.

• Data centre: a dedicated, secure space in a building or central location that concentrates computing and networking equipment to collect, store, process, distribute or give access to large amounts of data.

• Data centre services: services a data centre provides using physical infrastructure (land, buildings, power equipment, cooling, security) and IT infrastructure (servers, computers, storage, operating systems, security solutions, network and associated software platforms, networking equipment), together with human resources in India.

• Specified data centre, as enacted in March: a facility set up under an approved scheme, notified by the Central Government in the Ministry of Electronics and Information Technology, and owned and operated by an Indian company.

• Specified data centre, as substituted in August: a facility operated by an Indian company, whether it owns or leases it, that meets other conditions to be prescribed.

S&R Associates notes that this definition is wider than the one in the Harmonized Master List of infrastructure sub-sectors used for financing, which needs at least 5 MW of IT load. The tax definition has no size threshold.

What changed in August 2026, and why

The amending Act dealt mostly with other matters. It replaced the June 2026 ordinance that exempted foreign institutional investors on government securities, relaxed conditions for offshore funds managed from India, added exemptions for rough diamond sales and electronics component warehousing, extended the electronics tooling exemption to 2040-41, and raised the surcharge on special purpose vehicles of business trusts such as REITs and InvITs. Its data centre changes are short: PRS summarises them as removing the notification of the foreign company and the approved-scheme and notification requirements for the data centre, and extending the exemption to data centres that an Indian company leases and operates.

CBDT's FAQ gives the reasoning. Both the foreign cloud company and the Indian data centre company will have to furnish information in a form set by rules, which CBDT considers enough for the scheme to work, so the notification steps were dropped for ease of doing business. On leasing, CBDT says it was told the ownership requirement could be restrictive, because an Indian company may run a facility it has taken on lease.

Two effects follow. The exemption no longer waits on government lists of approved companies and facilities. Instead it now depends on rules: the specified data centre must meet conditions still to be prescribed, and reporting must follow a prescribed form. Until those rules exist, nobody can say exactly which facilities qualify.

Who is affected, and how each party is taxed

The government's documents describe a three-party structure, and only one party gets the exemption.

PIB's backgrounder says profits from domestic activity stay taxable, naming both data centre services sold to the global entity and resale to Indian customers. A Khaitan & Co note says the Income-tax Rules, 2026 express the safe harbour as an operating profit margin on operating expenses of at least 15%, and that it does not cover the foreign company's dealings with an associated Indian reseller, which follow normal transfer pricing.

What the holiday does not do

• It does not exempt the Indian data centre operator's profits or the reseller's margin.

• It does not cover a foreign company that owns or operates any of the data centre's physical infrastructure or resources.

• It is not automatic. Every column D condition has to be met, including the reporting rules once they exist. If a condition fails, ordinary rules apply, including the business connection and permanent establishment tests.

• It is an income-tax exemption only. GST, customs duty and state data centre incentives follow their own laws.

• It does not cut cloud prices by law. Any pass-through to customers is the provider's commercial decision.

What is still missing

The rules. Two sets are needed: the conditions a specified data centre must meet, and the form and manner in which the foreign company and the Indian data centre company report. We could not find either in searches on 7 November 2026. Re-check before relying on any reading here.

How users located in India are identified. Condition (c) sends every sale to users in India through an Indian reseller company. The Act does not say how a provider decides which users are in India, or how revenue is split between Indian and global customers. Expect that to surface in the reporting form or in practice.

Indirect ownership. S&R Associates notes the Act does not say whether the bar on owning or operating the data centre's infrastructure extends to ownership through an Indian subsidiary. If it does, captive structures may need to change to use both the exemption and the safe harbour. The August amendment left condition (b) untouched.

Customer-owned servers. Data centre services include IT infrastructure such as servers and storage. A foreign provider that owns its servers in a colocation cage may struggle to show it owns none of the facility's resources. This is our reading, not a settled position; Khaitan & Co also flags uncertainty over what operating the servers means and warns that too much control could cost the exemption.

What to prepare by 31 March 2027

None of this is tax advice. It is a list of facts to gather and questions for your tax adviser and suppliers before the first tax year closes.

If you buy cloud services in India

1. Map every cloud and SaaS contract. Record the billing entity (foreign or Indian), the regions you use, and whether the supplier says it will rely on serial number 13C.

1. Expect contracting-entity changes. A provider using the exemption must sell to Indian users through an Indian reseller company. Watch for novation or assignment notices, and check price, tax gross-up, termination and liability clauses before you accept.

1. Update the vendor master. A new Indian counterparty brings new registration details and may change invoicing and withholding. Ask your adviser how GST and TDS treatment changes for each affected contract.

1. Keep residency separate from billing. Buying through an Indian reseller does not put your data in India. Confirm regions in the contract and your data processing agreement, which matters for the DPDP Rules.

1. Budget on contract prices, not on the exemption. The law exempts the supplier's income, not your invoice. Any discount is a negotiation, and the usual rupee cost levers still apply.

1. Close the year cleanly. Keep the contract trail for tax year 2026-27, especially for any mid-year change of supplier entity.

If you operate or lease data centre capacity in India

1. Document how you operate the facility. Since the amendment, an Indian company may qualify by owning or leasing. Keep leases, operating agreements and evidence of who operates what.

1. Review customer contracts against condition (b). If a foreign customer could be said to own or operate infrastructure or resources in your facility, raise it with your adviser and the customer now.

1. Prepare for reporting. CBDT says both sides will furnish information. Make sure billing, metering and capacity records can produce customer-level data quickly.

1. Related-party operators: ask your adviser whether the 15% safe harbour fits your structure and how to opt in.

1. Track the rules. The prescribed conditions will decide which facilities qualify. Assign someone to watch CBDT notifications.

If you run finance for a foreign cloud provider's India business

1. Confirm the Indian reseller entity and its contracts cover all sales to users in India.

1. Confirm no group entity owns or operates the specified data centre's infrastructure or resources, directly or, if the rules say so, indirectly.

1. Build the reporting dataset now, so the prescribed form can be filled when it appears.

Worked example: two illustrative flows

These figures are invented. They show mechanics only, not a tax computation.

Flow A: a related-party data centre on the safe harbour. A foreign cloud group's Indian subsidiary operates a specified data centre and incurs ₹400 crore of operating expenses in tax year 2026-27.

• Margin at 15% on operating expenses: ₹400 crore × 15% = ₹60 crore

• Remuneration charged to the foreign parent: ₹400 crore + ₹60 crore = ₹460 crore

• The Indian subsidiary is taxed under normal provisions on its income, including the ₹60 crore margin.

• The foreign parent's income from procuring those services is exempt under 13C only if every column D condition is met, including routing Indian sales through an Indian reseller, and subject to how the indirect-ownership question is settled.

Flow B: an Indian enterprise buying cloud services. A Gurugram company spends ₹12 crore a year with a foreign cloud provider that decides to use the exemption.

The law changes who you contract with and how the supplier is taxed. It does not, by itself, change what you pay.

How this connects to AI and GPU capacity

The exemption targets hyperscale and AI demand from abroad. PIB's backgrounder cites industry estimates of about 1,280 MW of cloud data centre capacity in India, expected to grow four to five times by 2030, with nearly USD 70 billion of investment under way and another USD 90 billion announced. Other estimates use different bases; our piece on India's data centre capacity numbers reconciles them. Indian operators already cite the effect: Inc42, reporting a Reuters interview in September 2026, said Yotta's CEO credits the holiday with helping shift its customer mix towards global clients, who make up 75 to 80% of its customer base. Our article on Yotta's Vera Rubin GPU plans covers what that foreign-facing buildout means for Indian buyers, and our domestic versus hyperscaler GPU guide sets out the buying choice.

How eCorpIT can help

eCorpIT is a Gurugram-based technology organisation, founded in 2021, assessed at CMMI Level 5 and MSME certified, with senior-led engineering teams working across AWS, Microsoft and Google platforms. We do not give tax advice, but our data centre and cloud networking team can map which workloads run in which regions under which contracts, document colocation set-ups and plan migrations into Indian facilities. Talk to us at /contact-us/.

Last updated: 7 November 2026.

References

1. Tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India, 1 February 2026 — Press Information Bureau, Ministry of Finance

1. The Finance Act, 2026 (No. 4 of 2026), Gazette of India Extraordinary, Part II Section 1, No. 9, 30 March 2026 — Ministry of Law and Justice (Legislative Department)

1. The Taxation and Other Laws (Amendment) Act, 2026 (No. 21 of 2026), Gazette of India Extraordinary, Part II Section 1, No. 37, 17 August 2026 — Ministry of Law and Justice (Legislative Department)

1. FAQs on the Taxation and Other Laws (Amendment) Bill, 2026 (archived copy, 27 August 2026) — Central Board of Direct Taxes, Income Tax Department

1. Budget 2026-27 sets the stage for India as a global hub for cloud and AI infrastructure, 14 February 2026 — Press Information Bureau

1. The Finance Bill, 2026, Bill No. 3 of 2026, as introduced in Lok Sabha — Ministry of Finance, Union Budget

1. The Taxation and Other Laws (Amendment) Bill, 2026: summary and passage dates — PRS Legislative Research

1. The Income-tax Act, 2025 (No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025 — Ministry of Law and Justice (Legislative Department)

1. Memorandum explaining the provisions in the Finance Bill, 2026 — Ministry of Finance, Union Budget

1. Indian Budget 2026-27: tax incentives for data centres, 7 April 2026 — S&R Associates

1. Data centres and taxes: inside the tax incentive framework, September 2026 — Khaitan & Co

1. AI infra provider Yotta eyes USD 1.5 bn IPO by March 2027: report, 2 September 2026 — Inc42