India aims high: Tax breaks till 2047 for foreign cloud firms to boost data and AI ambitions

New Delhi (The Uttam Hindu): Finance Minister Nirmala Sitharaman, while presenting Budget 2026 in Parliament, described the technology and digital sector as the engine of the country's growth. The government has made a major move to make India a global data and artificial intelligence (AI) hub. Under this initiative, significant tax breaks have been announced for foreign cloud companies until 2047. The government's aim is to encourage the world's largest tech companies to establish their base in India.

You will only benefit from building a data center in India

The government has clarified that to take advantage of this tax exemption, foreign companies must use data centers established in India. From here, these companies can provide their cloud services to customers worldwide. Furthermore, if a foreign company provides services to Indian customers through an Indian reseller, it is also covered by this tax exemption. The government believes that this decision will rapidly increase foreign investment in India and lead to the establishment of large-scale data centers. This will not only accelerate the deployment of AI services but will also create new job opportunities for youth in the tech sector.

Internet speed will increase, but it will take time to become cheaper

It's also important to understand the impact this announcement will have on ordinary users. Experts say this is a policy decision whose effects will be felt gradually. If companies use Indian data centers, data processing time will be reduced, potentially increasing the speed of apps and websites. Video streaming and online gaming enthusiasts will benefit the most from this. However, there's no immediate guarantee that services will become cheaper. While operating costs for companies will certainly decrease, it may take time for customers to see the benefits.

AI and 5G will change the face of government services

The budget places special emphasis on the expansion of AI. India's increased data storage and computing capacity will make it easier to develop AI tools. The government wants to expand AI's use beyond the corporate sector, but also expand it to sectors like health, education, and agriculture, and improve government services. Storing data within the country will simplify compliance and improve government oversight. Additionally, the government has allocated a significant budget for digital infrastructure, which will further strengthen internet connectivity and 5G networks.