Finance Minister Nirmala Sitharaman Clarifies Tax Holiday Eligibility for Data Centres and GCCs

Finance Minister Nirmala Sitharaman has clarified that the government’s proposed tax holiday for data centres and Global Capability Centres will not be limited to foreign multinational companies. She stated that Indian-origin global firms, including TCS, could also qualify if they meet the prescribed eligibility norms.

The clarification came during an interview a day after the Union Budget 2026–27 announcement. The Minister emphasised that the incentive structure is designed to attract global operations while ensuring adherence to defined profit attribution rules.

Government’s Clarification on Eligibility Criteria

The Finance Minister explained that the policy applies to global companies establishing GCCs in India, regardless of whether they are foreign-owned or Indian-origin. She highlighted that eligibility would depend on how profits are defined, attributed and reported under the notified rules.

The distinction between income earned globally and income generated within India will guide the evaluation process. The Minister said that the tax holiday is a targeted measure and not a universal exemption.

Key Budget Measures Targeting Digital Infrastructure

The Union Budget 2026–27 introduced a focused set of tax measures aimed at boosting India’s position as a global hub for cloud services and digital infrastructure. A major proposal offers a tax holiday extending until 2047 for foreign companies providing global cloud services through data centres located in India.

The exemption applies only to the overseas entity and is designed to address tax obligations arising solely from operating data centres within the country. The package of measures reflects the government’s intent to promote long-term investment in India’s digital and electronics supply-chain ecosystem.

Safe Harbour Measures to Improve Tax Certainty

The Finance Minister also announced a safe harbour margin of 15% for cases where an Indian data service centre operates as a related party of a foreign cloud provider. This provision aims to reduce disputes linked to transfer pricing and enhance clarity for global businesses operating in India.

Additionally, the Budget introduced a safe harbour profit margin of 2% for non-resident entities warehousing electronic components in bonded facilities. The measure effectively reduces the tax incidence to approximately 0.7%, making India a more attractive location for electronics logistics and supply-chain operations.

Broader Context of Global Firms Operating in India

Sitharaman noted that most global firms expanding digital operations in India are already part of the domestic tax framework. She stated that the tax holiday is intended to support global-scale operations without conflicting with existing tax principles.

The incentive will apply strictly within the guardrails defined by the government, ensuring compliance and alignment with regulatory expectations. Her statement indicated that qualifying entities will be assessed in a structured and transparent manner.

Read More: Finance Minister Nirmala Sitharaman Defends STT Hike to Curb Excessive F&O Speculation.

Conclusion

The Finance Minister’s clarification confirms that the proposed tax holiday is open to a wider pool of global companies, including Indian-origin firms operating internationally. The Budget’s measures collectively aim to strengthen India’s digital infrastructure through long-term incentives and clearer tax rules.

Safe harbour provisions further enhance certainty for global cloud and electronics supply-chain operations. The initiative positions India as a competitive hub for data centres, GCCs and cloud service providers.

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