- India enacted a tax package targeting foreign data centers, electronics manufacturing, and rough-diamond trading in August twenty twenty-six.
- The legislation extends electronics equipment exemptions until twenty forty-one to boost domestic contract manufacturing and supply chains.
- Specific tax reliefs for rough-diamond sales through notified zones are set to begin on October first, twenty twenty-six.
India’s Parliament completed passage in August 2026 of a tax package aimed at attracting foreign companies involved in data centres, electronics manufacturing, customs-bonded warehousing and the rough-diamond trade.
The Lok Sabha passed the measure on August 6, 2026, and the Rajya Sabha cleared it on August 10, 2026. The enacted law is generally deemed to have taken effect on April 1, 2026, unless a provision sets another date.
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The Taxation and Other Laws (Amendment) Bill, 2026 does not offer an automatic corporate tax holiday to every foreign business. Each relief is linked to a defined activity, entity and set of conditions.
The measures cover foreign companies procuring services from qualifying Indian data-centre operators, supplying equipment to contract manufacturers, storing components in bonded facilities and selling eligible rough diamonds through notified zones.
The package is aimed at longer-term commercial activity. It also leaves companies to assess obligations outside the exempt income.
Commencement details and implementing requirements still govern how companies apply the provisions.
Leased Indian facilities broaden the data-centre exemption
The law relaxes the framework covering specified income earned by a foreign company that procures services from an eligible Indian data centre. It removes the need to separately notify both the foreign company and the facility.
The revised provision also recognises an Indian company operating the facility under a lease model. Ownership is no longer the only operating structure identified in the framework.
The facility must still qualify as a specified data centre. An Indian company must operate it, either by owning or leasing the facility, and prescribed conditions continue to apply.
One later analysis said the revised relief is intended to run through March 31, 2047. The enacted provisions retain the facility and eligibility requirements.
That structure may give global cloud and technology companies more flexibility when they obtain Indian infrastructure services without directly owning the underlying site.
Electronics equipment relief runs beyond the original 2030-31 deadline
The law extends an existing exemption for a foreign company that supplies capital goods, equipment or tooling to an Indian contract manufacturer producing specified electronic goods for a foreign company.
The previous endpoint, tax year 2030-31, moves to the tax year ending 2040-41. Covered products include mobile phones, laptops, all-in-one personal computers and tablets.
The list also includes servers, ultra-small-form-factor devices, relevant sub-assemblies, hearables, wearables and related accessories.
The exemption follows the manufacturing arrangement rather than the product label alone. A foreign supplier selling ordinary electronic goods directly into India cannot assume that its income qualifies.
The qualifying supply, manufacturer and goods must fit the statutory framework.
Bonded inventories support component supplies to Indian manufacturers
A separate provision covers qualifying income from storing and selling components held in a customs-bonded warehouse in India. The components must be supplied to an Indian contract manufacturer producing specified electronic goods on behalf of a foreign company.
The warehouse must have the required customs-bonded status. The foreign company must also furnish information in the prescribed form and manner.
The relief remains available through the tax year ending March 31, 2041. It may allow manufacturers to hold components closer to Indian production sites without automatically creating the same Indian income-tax exposure associated with local inventory arrangements.
The exemption does not resolve other parts of the transaction. Customs duties, goods and services tax, transfer pricing and permanent-establishment questions require separate review.
| Incentive | Qualifying activity | Stated period |
|---|---|---|
| Data-centre income | Foreign company procures services from a specified Indian facility | One later analysis said through March 31, 2047 |
| Electronics equipment and tooling | Foreign company supplies qualifying items to an Indian contract manufacturer | Through tax year 2040-41 |
| Bonded-warehouse components | Storage and sale of components for specified electronics production | Through March 31, 2041 |
| Rough-diamond sales | Sale through a notified special zone | October 1, 2026, through March 31, 2041 |
Notified zones set the conditions for rough-diamond sales
The law creates a 15-year exemption for income from selling rough diamonds through a notified special zone in India.
Eligible foreign companies include diamond-mining companies, sightholders of diamond-mining companies, brokers, aggregators and tender-and-auction entities connected with rough-diamond sales.
The stones must meet the statutory definition. That includes the relevant customs tariff classification and a Kimberley Process certification requirement.
The transaction must occur through a notified special zone. The company must maintain and furnish the prescribed information.
The relief begins on October 1, 2026, and continues through March 31, 2041. Its coverage therefore depends on the seller’s category, the diamonds, the zone and the required records.
Investment may create jobs without changing immigration rules
The law does not create a visa, work permit or immigration category. New activity in cloud infrastructure, electronics production and specialised trading could still increase demand for engineers, supply-chain professionals, finance specialists and senior managers.
Foreign nationals assigned to India will need the appropriate visa and employment authorisation. Their salaries, residential status and individual tax obligations remain separate from any relief available to the foreign employer.
An Indian professional moving abroad within a multinational group would likewise face the immigration and tax rules of the destination country. Corporate relief does not become an employee-level tax exemption.
Companies must check the operating conditions before restructuring
A foreign company considering the incentives should verify the following points before reorganising its Indian supply chain:
- The final enacted text and applicable commencement date.
- Whether the entity, transaction and income fit the precise statutory definition.
- Whether the relevant data centre, special zone or warehouse has the required status.
- Information-furnishing and record-maintenance requirements.
- Transfer-pricing consequences for connected-party transactions.
- Permanent-establishment exposure outside the specifically exempt income.
- Customs, goods and services tax and foreign-exchange obligations.
- Employee visas, payroll and individual tax requirements.
An exemption covering one income stream does not necessarily protect other Indian income earned by the same foreign company. The incentives are designed around particular commercial channels, not a general suspension of Indian tax.
As of August 2026, the clearest fixed dates are October 1, 2026, for the rough-diamond relief and March 31, 2041, for the electronics and bonded-warehouse measures. Companies must match those dates with the final statutory conditions before relying on the package.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
