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FM Sitharaman announces tax holiday for data centres in India till 2047

Data centres satiate one of the most important aspects of AI demand – the need for computing power.

3 min readNew DelhiUpdated: Feb 1, 2026 04:28 PM IST

India’s data centre market is currently estimated to be worth $10 billion. (Credit: Pixabay)

To capitalise on the boom in data centres led by the rapid adoption of artificial intelligence (AI) technology, Union Finance Minister Nirmala Sitharaman has proposed to provide a tax break until 2047 to foreign companies looking to set up such infrastructure in the country.

“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,” the Finance Minister said in her Union Budget 2026-27 speech Sunday.

“I also propose to provide a safe harbour of 15% on cost in case the company providing data centre services from India is a related entity,” she added.

India’s data centre market is currently estimated to be worth $10 billion, with around $1.2 billion revenue generated in FY24, according to a recent report by Anarock. As per real estate firm JLL, India is expected to add 795 MW of new capacity by 2027, taking the total capacity to 1.8 GW.

Last month, Union IT Minister Ashwini Vaishnaw said that private investments in India’s AI infrastructure could double from last year’s $70 billion by the end of the ongoing financial year (FY26). Last October, Tata Consultancy Services announced it will invest $6.5 billion over five years to build 1 gigawatt (GW) in AI-ready data centres. The same month, Google announced an investment of $15 billion to build a 1GW data centre, in partnership with the Adani Group. In December, Microsoft said it would invest $17.5 billion in the country, with primary focus on AI data centres.Amazon has announced Amazon announced it will invest $35 billion in India over five years, without specifying how much of it would go toward data centre expansion.

A research note by S&P Global from 2024 estimated that more than $100 billion will be invested in such facilities in the region over the next five years. The spending will capitalise on strong data growth and the rise in artificial intelligence (AI), cloud computing and digitalisation.

Data centres satiate one of the most important aspects of AI demand – the need for computing power. Computing capacity, or compute, is among the most important elements of building a large AI system, apart from algorithmic innovation and data sets. It is also one of the most difficult elements to procure for smaller businesses looking to train and build such AI systems, given the high costs.

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As per the note, India currently has a leased data centre capacity of 1-3 GW, which is the highest compared to other emerging markets like Indonesia, Malaysia, Philippines, Thailand and Vietnam.

Soumyarendra Barik

Soumyarendra Barik is a Special Correspondent with The Indian Express, specializing in the complex and evolving intersection of technology, policy, and society. With over five years of newsroom experience, he is a key voice in documenting how digital transformations impact the daily lives of Indian citizens. Expertise & Focus Areas Barik’s reporting delves into the regulatory and human aspects of the tech world. His core areas of focus include: The Gig Economy: He extensively covers the rights and working conditions of gig workers in India. Tech Policy & Regulation: Analysis of policy interventions that impact Big Tech companies and the broader digital ecosystem. Digital Rights: Reporting on data privacy, internet freedom, and India's prevalent digital divide. Authoritativeness & On-Ground Reporting: Barik is known for his immersive and data-driven approach to journalism. A notable example of his commitment to authentic storytelling involves him tailing a food delivery worker for over 12 hours. This investigative piece quantified the meager earnings and physical toll involved in the profession, providing a verified, ground-level perspective often missing in tech reporting. Personal Interests Outside of the newsroom, Soumyarendra is a self-confessed nerd about horology (watches), follows Formula 1 racing closely, and is an avid football fan. Find all stories by Soumyarendra Barik here. ... Read More