A 2047 Vision: Budget 2026–27 Sets Stage for India’s Global Digital Leadership

The Union Budget 2026–27 has delivered a decisive policy push for India’s digital economy, placing data centres, cloud services, semiconductors, AI, and digital infrastructure at the heart of the country’s next growth cycle. With a mix of long‑term tax certainty, manufacturing incentives, energy security measures, and governance reforms, the Budget positions India as a global hub for high‑value digital services and AI compute infrastructure.

The announcements come at a time when India’s data centre capacity is projected to cross 2,000 MW by 2027, driven by cloud adoption, AI workloads, and digital public infrastructure.

1. Cloud Services Get Unprecedented 21‑Year Tax Holiday

In a landmark move, the Government has announced a tax holiday until 2047 for foreign companies providing cloud services to global clients through India‑based data centres. This is the longest tax certainty ever offered to the sector.

Why it matters:

• Positions India as a competitive alternative to Singapore, UAE, Japan, and South Korea.

• Encourages hyperscalers to expand AI compute zones, GPU clusters, and multi‑region cloud availability zones.

• Reduces long‑term cost of operations for global cloud and AI companies.

Additional incentives include:

• 15% safe harbour margin for related entities offering data centre services from India.

• 5‑year tax exemption for global experts in cloud, cybersecurity, and AI—addressing talent shortages.

2. IT & Digital Services Reforms to Accelerate Cloud and Colocation Demand

The Budget simplifies India’s IT services taxation framework—directly benefiting cloud‑dependent enterprises:

• All IT services consolidated under one category with a 15.5% safe harbour margin.

• Safe harbour threshold increased nearly 7x, from ₹300 crore to ₹2,000 crore.

• Automated, rule‑based approvals for safe harbour.

• Unilateral APA processes fast‑tracked to a two‑year resolution window.

Impact: Lower compliance friction for IT/ITeS, SaaS, fintech, and global capability centres (GCCs)—all major consumers of data centre capacity.

3. Semiconductor Mission 2.0 Strengthens Hardware Supply Chains

The Budget reinforces India’s semiconductor and electronics ecosystem, a critical upstream enabler for servers, storage, and networking equipment:

• Launch of India Semiconductor Mission (ISM) 2.0.

• Expansion of the Electronics Components Manufacturing Scheme.

• Customs duty exemptions on capital goods for critical mineral processing and select electronic components.

Impact: Reduced import dependency for data centre hardware and improved domestic availability of chips, power electronics, and high‑density server components.

4. AI Integration Across Sectors to Drive Massive Compute Demand

AI is positioned as a national productivity engine:

• Integration of AgriStack and ICAR systems with AI.

• AI‑enabled governance and compliance systems.

• Support for AI‑driven assistive technologies through ALIMCO.

• AI identified as a force multiplier for public service delivery.

Impact: AI workloads—especially generative AI, computer vision, and predictive analytics—will significantly increase demand for GPU‑rich, high‑density data centres.

5. Digital Governance Reforms to Expand Data Volumes

The Budget accelerates digitalisation across government systems:

• Single digital window for cargo clearance.

• Rollout of Customs Integrated System (CIS) within two years.

• Automated TDS and compliance workflows.

• National Destination Digital Knowledge Grid for tourism.

• Digital documentation of all heritage and cultural sites.

Impact: Government and enterprise data volumes will surge, requiring secure, scalable storage and processing infrastructure.

6. Infrastructure & Urbanisation Push Creates Ideal Conditions for Data Centre Expansion

The Budget strengthens the physical backbone needed for data centre clusters:

• Development of Tier II & Tier III cities as economic regions—ideal for edge data centres.

• Seven High-Speed Rail corridors improving workforce and equipment mobility.

• ₹2 lakh crore support to states under the SASCI Scheme for urban infrastructure.

• New Dedicated Freight Corridors, 20 National Waterways, and a Coastal Cargo Promotion Scheme.

Impact: Improved logistics, land availability, and power connectivity will accelerate data centre deployment beyond metros.

7. Energy Security Measures Support Hyperscale Operations

Data centres require uninterrupted, clean, and cost‑efficient power. The Budget addresses this through:

• ₹20,000 crore CCUS scheme to support low‑carbon energy.

• Duty exemptions on capital goods for critical mineral processing.

• Extended duty exemption for capital goods used in lithium‑ion cell manufacturing.

• Nuclear power project duty exemptions extended till 2035.

Impact: Enhanced access to green power, battery storage, and long‑term energy stability—key for hyperscale and AI compute facilities.

8. Financial Sector Reforms Improve Access to Capital

Data centres are capital‑intensive, often requiring investments of ₹5–7 crore per MW. The Budget supports financing through:

• Market‑making framework and total return swaps for corporate bonds.

• High-Level Committee on Banking for Viksit Bharat to align credit flows with next‑gen infrastructure.

• Incentives for municipal bonds—useful for city‑level infrastructure supporting data centre parks.

9. Ease of Doing Business Measures Reduce Compliance Burden

Key reforms include:

• Automated TDS and PAN‑based compliance.

• Extended timelines for revising returns.

• Decriminalisation of non‑production of books and TDS lapses.

• Simplified foreign asset disclosure for small taxpayers.

Impact: Lower friction for digital firms operating across borders, improving India’s attractiveness for global cloud and IT investors.

Conclusion: A Defining Budget for India’s Digital Future

Budget 2026–27 marks one of the most comprehensive policy packages for India’s digital infrastructure sector. With tax holidays till 2047, AI‑driven governance, semiconductor expansion, energy security, and urban infrastructure development, India is poised to emerge as a global powerhouse for data centres, cloud services, and AI compute infrastructure.

The policy mix strengthens the foundation for:

• Hyperscale data centres

• AI compute clusters

• Cloud service providers

• Colocation and edge data centres

• Semiconductor and electronics manufacturing

• Digital service exporters

India’s digital economy is entering a new era—one powered by data, driven by AI, and anchored in world‑class infrastructure.

The Budget 2026–27 marks a decisive moment for India’s digital infrastructure landscape. The long‑term tax certainty for cloud services, the renewed thrust on semiconductors, and the deep reforms in digital governance collectively signal the Government’s commitment to positioning India as a global data and AI powerhouse. These measures will not only accelerate hyperscale data centre investments but also strengthen the entire value chain—from energy security and logistics to talent and innovation. DCAI & CDCAI welcomes this forward‑looking vision, which will catalyse high‑quality jobs, enhance technological sovereignty, and enable India to lead the next wave of global digital transformation. - Ajay Mishra, Director General, RESI & Chair- CDCAI