Domestic Data Centres to Get Same Tax Benefits as Foreign Firms: Ashwini Vaishnaw

Days after Finance Minister Nirmala Sitharaman announced a 20-year tax holiday for foreign companies operating data centres in India, Union IT and electronics minister Ashwini Vaishnaw said domestic data centre operators would be treated at par with foreign firms.

The announcement comes amid concerns raised by Indian companies such as Yotta and ESDS Software Solution. On February 1, Sitharaman proposed providing a tax holiday until 2047 to any foreign company offering cloud services to global customers using data centre services from India.

“After the Budget, the finance ministry has clarified that both domestic and foreign investors will be treated at par as far as tax benefits for data centres are concerned,” Vaishnaw said at a press briefing on Saturday, as reported by The Economic Times. He added that the clarification was issued following queries raised by the IT industry.

As per the finance minister’s proposal, foreign firms availing the tax holiday will need to provide services to Indian customers through an Indian reseller entity.

The Union Budget also proposes a safe harbour of 15% on costs where the company providing data centre services from India is a related entity.

Earlier, Outlook Business reported that tax holidays until 2047 and routing incentives could attract as much as $60 billion in foreign direct investment from players such as AWS, Azure and Google, targeting nearly 20 GW of data centre capacity. Experts told the publication that the government’s push comes at a time when India’s FDI inflows have been on a declining trajectory after peaking in 2021–22. Net inflows, adjusted for outflows, stood at around $70–72 billion then, before falling to roughly $52 billion in recent years.

Industry executives offered mixed views on the clarification from the Union IT ministry. Sunil Gupta, CEO of Yotta Data Services, called it a reassuring signal that helps dispel concerns that foreign hyperscalers were being favoured over domestic players.

He told ET that the tax holiday is aimed at attracting export-oriented cloud and AI workloads and positioning India as a global digital infrastructure hub. He added that any advantage for foreign operators is limited to a small segment of offshore contracts, while most long-term demand comes from domestic and regulated sectors where all players face the same tax regime.

However, ESDS Software Solution chairman Piyush Somani cautioned that the issue is not merely perceptual. He argued that Indian firms continue to pay full corporate tax, while foreign hyperscalers serving global markets from India could remain tax-free until 2047, potentially confining India to an infrastructure role while profits and intellectual property remain overseas.