Apple Wins Big As India Extends Manufacturing Tax Breaks Till 2041

Foreign companies that supply machinery to India-based contract manufacturers will get tax exemptions till 2041, according to a draft bill reviewed by Reuters. The move is seen as a major win for Apple, which had pushed for the change as it expands manufacturing operations in the country.

Apple has increasingly relied on India to reduce its manufacturing dependence on China. Notably, Counterpoint Research estimates that India will produce 26% of the world's iPhones in 2026, a sharp rise from just 6% four years ago.

The tax relief was first introduced in February this year, but was set to expire in 2031. The government has now pushed that deadline to March 31, 2041, describing the extension as a step to give companies more "tax certainty," the draft document showed.

Apple had sought this exemption to avoid a specific tax risk. Since Apple supplies costly iPhone-making equipment to its India-based contract manufacturers, Indian tax authorities could have classified this arrangement as a "business connection," a classification that does not apply to Apple's operations in China. Such a classification would have made Apple's iPhone profits taxable in India.

Who Else Benefits

The extended exemption is not limited to iPhone makers. It covers companies manufacturing mobile phones, tablets, laptops, hearing aids and wearable devices, per the draft bill, which still requires approval from both houses of Parliament.

A related exemption, also extended to 2041, covers foreign firms that earn income by storing and supplying electronic components to these manufacturers.

Both exemptions apply specifically to factories and warehouses located in customs-bonded zones, areas that fall outside India's customs border for tax purposes. Any device sold within India from these zones will still attract import duties, meaning the tax benefit mainly favours companies focused on exports.

India is also easing conditions for a separate tax break announced in February, a 20-year exemption running till 2047 for foreign firms operating data centres in the country to serve global clients. That earlier move was meant to prevent India from taxing these firms' worldwide income simply because they use local data infrastructure.

Under the new draft bill, foreign companies will be allowed to lease data centres in India instead of requiring their Indian partners to own them outright.

In a separate proposal, the government has floated a 15-year tax exemption for foreign diamond miners and traders selling rough diamonds through designated trading hubs in India, which is already the world's largest hub for diamond cutting and polishing.