A key policy change announced in India’s latest Union Budget has given Apple a significant boost as it deepens its manufacturing presence in the country. The government has decided to allow foreign companies to provide equipment to their contract manufacturers in specific zones for 5 years without triggering tax liability.
The decision, announced on Sunday as part of Finance Minister Nirmala Sitharaman’s 2026–27 budget, addresses a long-standing concern for Apple as it expands production in India to reduce dependence on China. According to Counterpoint Research, Apple’s iPhone market share in India has doubled to 8% since 2022. While China still accounts for 75% of global iPhone shipments, India’s share has risen sharply to 25% over the same period.
Apple had been urging the government to amend income tax rules to avoid being taxed for owning high-end manufacturing equipment supplied to its contract manufacturers. Unlike in China, Indian tax laws could have treated such ownership as a “business connection”, potentially exposing Apple to taxes on iPhone sales profits in India. This risk had earlier pushed contract manufacturers such as Foxconn and Tata to spend billions of dollars themselves on machinery.
To resolve this, India said it is changing the law “to promote manufacturing of electronic goods for a contract manufacturer”, ensuring that mere ownership of machines by a foreign company does not result in taxation.
The rule will apply until the 2030–31 tax year and only to factories located in customs-bonded areas, which are technically outside India’s customs border. Devices sold domestically from these facilities will attract import duties, making them suitable mainly for exports.
“We are saying that if you bring your machine, and that machine is used by a local manufacturer to produce something, we will … exempt you for 5 years. We are giving them certainty,” Revenue Secretary Arvind Shrivastava said at a post-budget press conference.
The government clarified in budget documents that “any income arising on account of providing capital goods, equipment or tooling to a contract manufacturer, being a company resident in India, is eligible for exemption.”
The move could encourage Apple and other global firms to fund expensive machinery directly, lowering the upfront cost for local partners and speeding up factory expansion.
“This exemption removes a key deal-breaking risk for electronics manufacturing in India,” said Shankey Agrawal, partner at tax-focused law firm BMR Legal. “The result is faster scale-up and greater confidence for global electronics players to manufacture in India.”
Apple had held multiple discussions with Indian officials in recent months over the issue, according to a news agency. The earlier rules did not affect Samsung, as most of its phones are produced in its own factories in India.
Also read: Viksit Workforce for a Viksit Bharat
Do Follow: The Mainstream formerly known as CIO News LinkedIn Account | The Mainstream formerly known as CIO News Facebook | The Mainstream formerly known as CIO News Youtube | The Mainstream formerly known as CIO News Twitter
About us:
The Mainstream is a premier platform delivering the latest updates and informed perspectives across the technology business and cyber landscape. Built on research-driven, thought leadership and original intellectual property, The Mainstream also curates summits & conferences that convene decision makers to explore how technology reshapes industries and leadership. With a growing presence in India and globally across the Middle East, Africa, ASEAN, the USA, the UK and Australia, The Mainstream carries a vision to bring the latest happenings and insights to 8.2 billion people and to place technology at the centre of conversation for leaders navigating the future.
