In a significant push to establish India as a global digital hub, Finance Minister Nirmala Sitharaman announced in the Union Budget 2026-27 a proposed 20-year tax holiday for foreign companies setting up data centers and cloud computing infrastructure in India. This initiative, part of the draft National Data Centre Policy 2025, is designed to attract foreign direct investment (FDI) and accelerate the growth of the country’s IT infrastructure.
The proposed policy includes a range of incentives to make India a preferred destination for global tech investment:
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Long-Term Tax Holiday: Eligible companies meeting prescribed capacity, energy efficiency (PUE), and employment targets will enjoy up to 20 years of tax exemptions.
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GST and Input Tax Relief: Input tax credits will be available for construction materials, HVAC systems, electrical equipment, and other capital assets critical for data center operations.
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Support for AI and Emerging Technologies: The policy aims to bolster sectors such as AI, fintech, and 5G, particularly focusing on developing Tier-II and Tier-III towns as emerging digital hubs.
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FDI and Capacity Goals: The initiative seeks to increase India’s data center capacity fivefold to 8GW by 2030, backed by an estimated $30 billion in capital expenditure.
Key Industry Players: Leading global and Indian firms, including ST Telemedia (STT GDC India), CtrlS, NTT India, Tata Communications, Bharti Airtel (Nxtra Data), Sify Technologies, Reliance Jio, AdaniConneX, NxtGen, and L&T, are expected to benefit from this policy.
Industry Outlook: India’s data center sector has grown at a 24% CAGR since 2019, reflecting robust demand and high occupancy rates. Experts say the tax incentives and regulatory clarity are likely to accelerate investment, improve technology adoption, and create employment opportunities, reinforcing India’s position in the global digital economy.
With this bold initiative, the government aims to catalyze the IT sector, attract foreign capital, and strengthen India’s digital infrastructure, making the country a strategic hub for cloud computing and next-generation technologies.