In a move aimed at accelerating electronics manufacturing, the Indian government has changed tax rules to remove a key risk faced by global technology companies operating through contract manufacturers. The decision is expected to strengthen India’s position as an export-focused manufacturing hub.
The government has allowed foreign companies to provide machinery and equipment to their Indian contract manufacturers without triggering tax liability for a period of 5 years. This change directly benefits Apple, which has been expanding its manufacturing footprint in India as part of its strategy 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, The share has jumped 4 times to 25% over the same period.
Apple had raised concerns that Indian income tax laws could treat ownership of high-end manufacturing equipment as a “business connection”. This could have exposed the company to taxes on profits from iPhone sales in India. Due to this risk, Apple’s contract manufacturers, including Foxconn and Tata, were forced to invest billions of dollars themselves in production machinery.
Addressing this issue, the government said the rule change is meant “to promote manufacturing of electronic goods for a contract manufacturer”. It clarified that ownership of machinery by a foreign company alone will not attract tax.
The announcement was made as part of Finance Minister Nirmala Sitharaman’s 2026–27 Union Budget, presented on Sunday.
The exemption will apply until the 2030–31 tax year and will be limited to factories located in customs-bonded areas. These zones are treated as being outside India’s customs border. Products sold domestically from such facilities will still 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 also stated, “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.”
A tax expert from an Indian law firm said the move “removes a key deal-breaking risk for electronics manufacturing in India” and will lead to faster scale-up and higher confidence among global manufacturers.
Apple did not comment immediately. Reports by a news agency had earlier noted that Apple held several discussions with Indian officials over concerns that existing laws could slow future growth. The earlier rules did not impact Samsung, as it manufactures most of its phones in its own Indian factories.
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