In this Union Budget, India reframes cloud as infrastructure and compute as capital, making a decades-long bet that the factories of the digital era are data centres and AI clusters, and that the export engines are GCCs building global platforms from Indian soil.
In her Parliament speech on Sunday, Minister of Finance Nirmala Sitharaman highlighted the need for data capital—hyperscale data centres, AI compute clusters and cloud platforms—via long horizon incentives and a broader digital economy push. In her most sweeping bid yet to anchor global cloud infrastructure in India, she announced: “Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India. It will, however, need to provide services to Indian customers through an Indian reseller entity.”
This announcement of a tax holiday is a strong signal aimed at accelerating capital inflow, early capacity creation, and faster enterprise cloud adoption at scale. Sunil Gupta, co-founder, CEO and MD, Yotta Data Services believes that as cloud and AI workloads move from experimentation to regulated and business-critical deployment, global cloud providers are unlikely to own and operate all physical infrastructure themselves.
Instead, he explains, “they will increasingly adopt asset-light models, outsourcing both co-location and high-performance GPU infrastructure to trusted Indian partners while focusing on platforms, software, and customer engagement. This allows them to scale rapidly, manage capital and technology risk, and operate within a stable and transparent tax framework under the safe harbour regime.”
“By placing AI at the heart of economic and governance priorities, the government has signalled its commitment to building a more productive, competitive, and technology led economy,” says Puneet Chandok, president, Microsoft India & South Asia. “Long term policy certainty recognises that digital infrastructure is now strategic national infrastructure.”
Sitharaman also proposed “to provide a safe harbour of 15 percent on cost in case the company providing data centre services from India is a related entity.”
In redefining India’s pitch for new-age capital, the Budget identified two distinct layers of tax certainty. It is offering a 15 percent safe harbour specifically for related-party data centre transactions to encourage hyperscalers to base cloud infrastructure in India. While independently raising the safe harbour ceiling for IT and GCC exporters from Rs 300 crore to Rs 2,000 crore with a unified 15.5 percent margin to give the broader services ecosystem predictable, dispute-free compliance. Together, these measures align India’s cloud infrastructure ambitions with the operational needs of the country’s largest digital services engines.
By raising the safe harbour threshold to Rs 2,000 crore and automating approvals, “the government is effectively de-risking the expansion of global capability centres [GCCs]. In a VUCA [volatility, uncertainty, complexity, and ambiguity] climate, this provides the institutional stability required for global enterprises to shift mission-critical AI and R&D workloads to Indian soil,” explains DD Mishra, vice president analyst at Gartner.
These initiatives are being seen as big relief reforms for GCCs and larger IT exporters—speeding compliance, easing transfer pricing and enabling higher value mandates like AI development, platform engineering and cloud architecture.
However, Mishra warns the need to monitor the tax complexity surrounding domestic venture capital, which could inadvertently starve deep-tech startups of the very oxygen they need to scale. Second, as we are entering a ‘proof of value’ crisis, Mishra projects that if IT service providers cannot demonstrate tangible return on investments from AI by late 2026, “enterprises will likely initiate a budgetary pushback. This would create a negative feedback loop, dampening the growth of the very cloud and data centre ecosystem the government has so aggressively incentivized today.”
First Published: Feb 01, 2026, 16:36
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