India offers zero taxes through 2047 to attract AI jobs globally

As global competition to build AI infrastructure intensifies, India has imposed foreign taxes on foreign cloud providers through 2047 on services sold outside the country if they can run services from Indian data centers – seeking to attract the next wave of AI computing investment, even as power shortages and water stress threaten the South Asian nation’s growth.

On Sunday, India’s Finance Minister Nirmala Sitharaman he announced (PDF) proposal in the country’s annual budget, to provide a tax holiday – no taxes – on income from cloud services sold outside India if the services are based in the country’s data centers. Sales to Indian customers should be handled by wholesalers who are incorporated and taxed at home, he told parliament. The budget also provides for a safe harbor of 15% including cost for Indian workers providing services to foreign organizations.

The announcement comes as US cloud giants including Amazon, Google, and Microsoft rush to increase data volumes around the world to support the rise of artificial intelligence services, with India seen as a bright spot for new investments. The country offers a great deal of technical talent and demand for cloud services, and has positioned itself as an important alternative to the US, Europe, and other parts of Asia for infrastructure development.

In October, Google said it would investing $15 billion building an AI hub and expanding data centers in India, its biggest commitment in the country so far, to follow A $10 billion commitment in 2020. Microsoft followed in December with plans set $17.5 billion by 2029 to expand its AI and cloud, funding new data centers, infrastructure, and training programs. Amazon also raised its stake in December, saying it would invest in cash another $35 billion in India by 2030, based on its total commitment of around $75 billion as it expands its retail and cloud services.

India’s domestic information sector is also expanding to meet global demand. In November, Digital Connexion, a consortium backed by Reliance Industries, Brookfield Asset Management, and Digital Realty Trust, said it would. investing $11 billion by 2030 to set up a 1-gigawatt, AI-focused campus in southern Andhra Pradesh. The project, which covers about 400 acres in Visakhapatnam, is among the largest projects announced in India and reflects the growing interest from domestic and international investors in building AI-ready infrastructure in the country. Separately, Adani Gulu said in December that they are preparing a total of $5 billion along with Google in its AI data center project in the country.

However, expanding the number of data centers in India can be difficult, given the limited availability of electricity, high electricity costs, and water shortages. major obstacles for high-powered AI applications. These challenges can delay construction and raise operating costs for cloud providers.

“Data center announcements show that they are being seen as part of the business rather than infrastructure,” said Rohit Kumar, founding partner of New Delhi-based Quantum Hub, a public policy analysis and technology consultancy. The push could attract more private investment and strengthen India’s role as a data and computing hub, although challenges related to power availability, land acquisition, and government approval remain, he added.

Sagar Vishnoi, co-founder and director of Noida-based think tank Future Shift Labs, said India’s data capacity is expected to exceed 2 gigawatts by 2026, from just over 1 gigawatt currently, and could expand fivefold to over 8 gigawatts by 2030, driven by a $3 billion investment. Although the budget shows that it wants to accelerate the development of digital and computer systems, Vishnoi said that allowing foreign cloud companies to make profits without tax until 2047 shows a “technological bet on the world’s Big Tech,” as India can create its own technologists in the next two decades.

He added that the provision of transport services to Indian users through retail businesses would leave small domestic players competing for smaller spaces, rather than receiving similar incentives.

The federal budget also encouraged the expansion of India’s role in electronics and semiconductor manufacturing, as the country aims to continue the rally and gain greater profits in global supply chains. The federal government will launch the second phase of the India Semiconductor Mission, the finance minister said, which will focus on the production of equipment and materials, the development of smart home appliances, and strengthening supply chains, and support research centers and industry-led education to build skilled people.

In addition, the Indian government has increased the funding of the Electronics Components Manufacturing Scheme to $400 billion (about $4.36 billion), from ₹229.19 billion (about $2.50 billion), the program – which was launched in April 2025 – has attracted more than double its initial target, Sitharaman said.

The plan provides a built-in incentive for increasing production and sales, reimbursing some of the costs of companies that make major components such as printed circuit boards, camera modules, connectors, and other parts used in phones, servers, and data equipment. By tying payments to actual goods rather than future services, the program is designed to attract global suppliers to India and reduce dependence on imported goods – a long-standing criticism of the country’s push.

Along with the increase in spending on electronic equipment, the government budget also proposed a five-year tax exemption starting in April for foreign companies that supply equipment and materials to electronic equipment manufacturers operating in joint ventures. The move could benefit companies including Apple, which is heavily dependent on contract manufacturing in India and has previously been reported to have done so. sought clarity from New Delhi on the tax treatment of advanced iPhone manufacturing equipment supplied to partners.

The budget also sought to address the challenges in key minerals, such as India difficulties and tightening the global supply of non-earthly resources used in electric vehicles, electronic devices, and security systems. The finance minister said the government would support mineral-rich states including Odisha, Kerala, Andhra Pradesh, and Tamil Nadu by establishing rare earth corridors to promote mining, processing, exploration, and production. This movement builds on a seven-year intensive program approved at the end of 2025 to increase the production of rare earth magnets, because access to materials from China – which controls the world’s work – has become very difficult.

Beyond AI infrastructure and electronic manufacturing, the Indian government has also moved to promote e-border trade, with the aim of helping small businesses meet global demand. The Ministry of Finance has said that the current $1 million (about $11,000) risk for each export will be removed, a move that is expected to benefit small manufacturers, artisans, and startups selling overseas through online platforms. The government is streamlining the handling of rejected goods and refunds using technology, addressing a long-standing problem for exporters, Sitharaman said.

Overall, recent initiatives emphasize India’s desire to position itself as a global technology hub, including cloud computing, electronics manufacturing, and minerals. This strategy aims to advance the importance of AI and transform supply chains. However, its success will depend on execution – from reliable power and water for data centers to sustainable support for domestic innovation – as global companies and investors test whether India can translate incentives into sustainable leadership in the AI ​​era.