A major policy announcement in the latest Union Budget is expected to significantly strengthen India’s technology and data centre ecosystem, with Hyderabad emerging as one of the key beneficiaries. The Union government has announced a tax holiday for foreign cloud service providers that use Indian data centres to deliver services globally, offering exemptions on corporate tax on profits earned from such operations until 2047.
The announcement was made during the Budget speech by Finance Minister Nirmala Sitharaman, who highlighted the government’s intent to position India as a global hub for digital infrastructure. The tax incentive provides long-term policy clarity, covering nearly 20 years, and is aimed at attracting sustained foreign investment into the country’s growing cloud and data centre landscape.
Industry experts believe this move will accelerate the expansion of data centre infrastructure across major technology hubs, particularly Hyderabad. The city already hosts a strong base of technology companies, global capability centres, and cloud operations. With rising demand for cloud computing, AI tools, online banking, e-commerce, and streaming services, data centres are becoming critical to India’s digital economy.
India’s data centre market has been growing rapidly, and the new tax holiday is expected to further strengthen this momentum by encouraging global cloud players to build and scale facilities locally. The expansion is also expected to generate employment and drive broader economic activity.
Puneet Chandok, president of Microsoft India, said, “India is no longer just a user of technology; we are its engine. The 2026 Budget reframes compute as capital, providing the long-term certainty needed to treat digital infrastructure as a strategic national asset. The Government is signalling its commitment to a technology-led economy. The landmark tax holiday until 2047 provides the long-term policy certainty required to recognise digital infrastructure as a strategic national asset.”
Tejesh Kodali, group chairman of Hyderabad-based Blue Cloud Softech Solutions, said, “The proposed tax holiday till 2047 for foreign cloud service providers setting up data centres in India, supported by a 15 per cent safe harbour framework for related-party data services, strengthens policy certainty for global investors.” He added, “By aligning capital investment, fiscal stability, and regional strengths with strategic resources, the budget reinforces a sustained growth narrative, positioning India as a credible global hub for advanced manufacturing and digital infrastructure.”
The policy aligns with the government’s broader strategy to enhance India’s competitiveness against other countries offering incentives to attract global technology investments.”
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