India has set a tax holiday for foreign cloud companies that serve customers worldwide from data centers in the country, and executives say it is drawing interest from global cloud and hyperscale providers. The catch: the government has not yet written the rules that put the holiday into effect, according to a report in The Hindu BusinessLine.
What the holiday offers. On February 1, 2026, India’s finance minister announced that a foreign company that provides cloud services to customers around the world through data centers in India will receive a tax holiday until the fiscal year ending March 2047. In practice, income that such a company earns from customers outside India will not be taxed by India until 2047.
The exemption is not automatic. The foreign company and the data center operator must both be notified by India’s IT ministry, among other steps. The report says the government has not yet notified the rules to put this into practice. A senior executive in the sector said there is “a good amount of confidence” that the policy will not be pulled back.
Why global players are looking. Manoj Paul, managing director for India at Equinix, said the tax certainty strengthens India’s position as a place for cloud and artificial intelligence infrastructure. Equinix, a data center operator in Redwood City, California, is seeing growing demand from cloud providers for capacity and interconnection in India, including for workloads that serve users outside the country, he said. 76% of its customers operate in more than two regions, such as the Americas, Europe and Asia Pacific.
Paul called it “highly feasible” for global companies to serve international customers from India. He pointed to the country’s position between Southeast Asia, the Middle East, Africa and Europe, and to new undersea cables that land in Mumbai, in western India, and Chennai, in southern India.
Sharad Agarwal, chief executive of Sify Infinit Spaces Limited, said the tax clarity helps new foreign investment. He said talks with foreign players have increased sharply over the last six months. He added that rising demand for artificial intelligence computing, the Middle East crisis pushing companies toward India, and faster deployment in India also help. Because the industry
The size of the opportunity. Analysts at the research firm JLL expect India’s data center capacity to triple from 1.6 gigawatts in mid-2026 to six gigawatts by 2029. They cite tax holidays, state incentives and more than $50 billion in commitments from global hyperscalers, which will build nearly 30% of the new capacity themselves. In the first half of 2026, data centers in India took up 101 megawatts of capacity, more than 20% above the three-year average. Capacity committed in advance by hyperscalers made up 82% of that total.
What could slow it. Industry players say the holiday alone will not bring in global providers. The president of the Bharat Digital Infrastructure Association, which has written to a Union minister several times, listed barriers: provisions in customs law, foreign exchange rules, the Reserve Bank of India’s rules on overseas borrowing and lending, loan-recovery rules, and an 18% integrated goods and services tax charged up front on imported graphics processors. The association proposes a framework for lenders to exit data center loans, modeled on aircraft leasing, a deferral of the import tax through postponed accounting, and bonded status under customs law.
Why this matters. For American cloud and AI companies, the holiday could lower the cost of serving customers outside India from Indian sites. Until the government publishes the rules, executives are working from the announcement alone.
An Equinix data center in Silicon Valley, California, United States. (Photo: Equinix, Inc., CC BY-SA 4.0, Wikimedia Commons)
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