The Budget proposal, which offers a 20-year tax holiday until 2047 to any foreign company purchasing data center services in India, allays fears of their global income being taxed by Indian authorities.
Regardless of whether a global company sets up its own data center in India or purchases services from an Indian data centre, the tax treatment will be the same, ensuring a completely level playing field, they say. The effective corporate tax rate in India is 25.17 percent.
Some of the major domestic data centers in India are Nxtra Data (subsidiary of Airtel), CtrlS Datacenters, Yotta Infrastructure and AdaniConneX.
Corporate tax will be levied on profits made by domestic data centers on revenues from services provided to global entities and from resale of cloud services to Indian customers.
If the data center is a subsidiary or branch of a foreign company, the 15 percent safe harbor margin applies and corporate tax is charged accordingly.
Sources said the effective tax burden will be almost the same regardless of whether the data center is a subsidiary of a foreign company or promoted by a domestic entity.
To boost investment in data centres, the Budget for FY27 has proposed to provide tax exemption till 2047 to any foreign company providing services to any part of the world outside India by procuring data center services in India. The sale of such services to Indian users will be made through an Indian reseller and will be taxed appropriately, the Budget proposal said.
It also proposed to provide a 15 percent safe harbor to the resident entity providing data center services to a related foreign company (which provides cloud services to any part of the world outside India), it added.
This means that the tax authorities will accept that the operating profit declared by the Indian industry is 15 percent without detailed investigation.
Published on February 8, 2026
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