Budget 2026–27 signals push for Cloud and Data Centre growth

The Union Budget 2026–27, presented by Finance Minister Nirmala Sitharaman, outlined a series of policy measures aimed at strengthening India’s cloud computing and data centre infrastructure. Recognised as a foundation for the digital economy, these facilities support emerging technologies such as artificial intelligence, analytics and cloud-based services. The latest Budget reflects the government’s intention to position digital infrastructure as a key pillar of economic development.

Tax Incentives to Attract Global Investment

A major announcement in the Budget was the introduction of long-term tax incentives for companies investing in cloud and data centre operations. The government proposed a tax exemption extending until 2047 for foreign firms that establish their global cloud services from data centres located in India.

To be eligible, companies are required to deliver services to Indian customers through locally registered reseller entities. This provision is intended to ensure greater domestic participation in the cloud services ecosystem while encouraging multinational providers to expand their physical presence in the country. The move is expected to support India’s ambition to become a regional hub for hyperscale data centres and digital services.

Simplifying Taxation Through Safe Harbour Rules

In addition to fiscal incentives, the Budget introduced reforms to ease regulatory and compliance requirements for technology service providers. A revised safe harbour framework proposes a fixed cost-based tax rate of 15 per cent for data centre and related cloud services, offering greater certainty on tax liabilities.

The government also increased the eligibility threshold for safe harbour provisions in the IT services sector from Rs 300 crore to Rs 2,000 crore. Approvals will be processed through an automated system, reducing administrative delays and lowering the risk of prolonged tax disputes.

Supporting Long-Term Digital Infrastructure

Taken together, these measures underline the government’s broader strategy to create a more favourable environment for cloud and data centre investments. By reducing regulatory complexity and offering fiscal stability, policymakers aim to attract foreign capital and accelerate the development of large-scale facilities.

With data localisation requirements and rising demand for AI-driven workloads placing increasing strain on existing infrastructure, the reforms seek to expand national data capacity. Industry observers view the initiatives as a step towards building a more resilient, competitive and future-ready digital ecosystem.

Also Read: https://www.voicendata.com/news/union-budget-202627-focus-on-ai-and-semiconductor-growth-11063614