Budget 2026: Government to provide tax holiday for foreign companies, economy, union budget 2026

The Union Budget 2026-27 signalled a strategic shift toward institutionalised innovation by aggressively lowering regulatory barriers and strategically re-engineering India’s fiscal framework to establish the nation as the definitive global hub for data, technology, and innovation, reacted industry experts and analysts.

Expanding the Safe Harbour threshold to ₹2,000 crore alongside an automated approval system provided much-needed fiscal predictability for large Global Capability Centres (GCCs), industry stakeholders said. “The budget’s precise, data-driven approach to safe harbour is a masterstroke in regulatory clarity.

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The proposal of a tax holiday until 2047 for any foreign company establishing data centres in India, coupled with a specific safe harbour of 15% on cost for companies providing data services from India to a related entity, creates a powerful anchor incentive,” said Avinash Vashistha, Chairman & CEO of Tholons and former Chairman and CEO of Accenture India.

According to Mr. Vashistha, by clubbing all IT services under a single category with a common safe harbour margin of 15.5%, enhancing the monetary threshold for availing this benefit to ₹2,000 crore from ₹300 crore, and approving it through an automatic rule-driven model, the government has delivered a predictable, scalable, and globally competitive ecosystem that will accelerate the domiciliation of global data and IT operations.

Gartner, a global tech research firm, said that, in today’s VUCA (Volatile, Uncertain, Complex, Ambiguous) landscape, this move transformed India from a mere delivery hub into a stable, strategic sanctuary for global enterprises.

D.D. Mishra, VP Analyst at Gartner, said, “Simultaneously, the 20-year Tax Holiday for Cloud Service Providers acknowledges that data is the new sovereign currency. This is a massive tailwind for AI-enabled Data Centres, though its success hinges entirely on our ability to scale industrial power infrastructure and cooling requirements.’’

 The Budget 2026–27 sent a decisive signal to global investors by providing a long‑term tax holiday for foreign cloud service providers using Indian data centres, said KPMG in India.

Purushothaman K.G., Partner and Head of Technology Transformation and AI at KPMG, was of the opinion that by proposing all these initiatives, India has placed digital infrastructure at the heart of its investment agenda. “These measures will sharply reduce the cost of operating at scale, derisk long‑term capital commitments and strengthen India’s position in global technology supply chains. This will also catalyse a new wave of high‑quality FDI into data infrastructure, and other areas,’’ Mr. Purushothaman added.

Abhinav Johri, Partner, Technology Consulting, EY India, called the proposed tax holiday for foreign cloud service providers a strategic declaration.

“By anchoring global cloud infrastructure within the country, India positions itself as a digital backbone for the world. This accelerates investment into data centres, strengthens sovereign digital capacity, and catalyses the domestic technology ecosystem,” Mr. Johri commented.

“The data centre tax holiday is a watershed moment for India’s digital economy,’’ reacted Shashank Karincheti, Co-founder & CPO at Redacto.ai.