India’s Union Budget for the year 2026 has made an incredibly clear statement regarding technology – in that the growth of the future economy will depend on three things: data, compute, and cloud infrastructure.
Announcing the Budget in Parliament, Union Finance Minister Nirmala Sitharaman stated that foreign-based companies providing global cloud services using Indian-based data centres will receive a tax holiday through 2047. There was one stipulation: foreign-based companies must provide their services for Indian customers through an Indian company as their reseller. This change in policy indicates a long-term strategic change, as India is now treating cloud services not only as a digital service but also as an essential piece of national infrastructure, equal to roads, ports, and power.
The Budget also redefined hyperscale data centres, AI computing clusters, and cloud-based platforms as the ‘factories of the digital era’. The government is encouraging companies to build additional capacities, thereby accelerating the adoption of enterprise-based cloud services, by providing multi-decade certainty regarding tax rates and the promotion of investment on a large scale by foreign investors.
Cloud and AI as capital, not just software
Industry experts see significant meaning in this development. Yotta Data Services’ Sunil Gupta suggested that the shift to chillier/assets-light models is occurring among providers of global cloud services, with hardware from India being used by such providers over time and these providers supporting platforms, software solutions, and supporting customer experience.
With the introduction of a new safe harbour regime allowing for greater certainty in taxation, companies can implement such models with less risk.
In addition to the tax-free environment, Finance Minister Nirmala Sitharaman announced a safe harbour margin of 15% for providers of related party data centre services, which may help alleviate transfer pricing issues with hyperscale companies operating in India.
The budget also increases the safe harbour threshold for IT companies and GCC exporters from ₹300 crore to ₹2000 crore, with a combined margin of 15.5%. Concurrent with this, Gartner analyst D.D. Mishra opined that this will enable enterprises to make less risky decisions regarding whether or not they will expand their operations in response to the global economic volatility while providing greater opportunities for enterprises to move their mission-critical work (AI development, R&D and platform engineering) to India.
ALSO READ: Google settles privacy lawsuit for $68 million over Google Assistant recordings
$90 billion pledged, more on the way
India has already received commitments of $90 billion for AI and other related investments, according to Ashwini Vaishnaw at the post-budget press conference. He also indicated that an additional $70 billion worth of commitments for AI and related technologies are already underway; therefore, it is very likely that total commitment amounts will increase to around $200 billion.
Google, Microsoft, and Amazon have made significant investments in areas such as cloud regions, AI infrastructure, and data centres across the country.
Puneet Chandok, Microsoft India’s president, has stated that the clarity surrounding this policy confirms that digital infrastructure is defined as “nationally strategic infrastructure” and thus is vital for the delivery of public services, innovation by enterprises, and maintaining a long-term competitive position.
As for risks to watch, experts warn that the magnitude of the proposed incentives is substantial. Whether the result will be successful, however, will depend largely on execution. Complexities with taxation related to local venture capital may negatively affect startups in the deep-tech space. IT firms will also need to demonstrate the business results from investments in AI by late 2026 in order to reduce the potential for enterprises pulling back on their spending on AI solutions.
Nevertheless, Budget 2026 makes it clear that India has placed a long-term bet on being the global leader in cloud, AI, and data-based growth, and that it will provide an environment of policy certainty in support of that aspiration for the next 20 years until 2047.
FOR MORE: https://civiclens.in/category/https-civiclens-in-technology/
About the Author
