India Simplifies Data Centre Tax Incentives with New Law
India's parliament has passed a tax law amendment bill that simplifies incentives for data centres. The changes remove separate government approval requirements and extend benefits to leased facilities, aiming to attract more cloud and AI infrastructure investment.
India's ambition to become a global hub for cloud and AI infrastructure received a significant boost as the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026. This legislation simplifies the country's recently announced tax incentives for data centres by eliminating the need for separate government approvals for eligible foreign companies and Indian data centres. The benefits will now also extend to leased facilities.
Previously, both foreign companies and data centres had to obtain separate government notifications to qualify for exemptions. Industry body Nasscom had pointed out that these requirements added unnecessary complexity. The amendment removes these notification requirements, instead basing eligibility on statutory conditions. This is expected to reduce administrative hurdles for global cloud and technology firms, particularly those operating through complex group structures.
The amendments also ensure that existing data centres are not excluded from the benefits simply because they were established before a specific scheme was notified. Furthermore, the bill introduces flexibility in ownership structures by allowing Indian companies to operate data centres on a lease model, in addition to the existing ownership-based model. The overall goal is to make India a more attractive destination for cloud and AI infrastructure investments by streamlining processes.
Industry executives have broadly welcomed the relaxations, stating they reduce compliance burdens and enhance India's competitiveness. Sunil Gupta, CEO of Yotta Data Services, believes these changes will significantly increase global demand for India-based sovereign cloud and AI infrastructure. Sridhar Pinnapureddy, co-founder of CtrlS, echoed this sentiment, noting that the reforms strengthen India's position as a preferred destination for hyperscalers and cloud providers.
However, analysts caution that tax certainty alone may not be sufficient to drive investment. Factors such as reliable power availability, robust connectivity, and regional customer demand will continue to play a crucial role in investment decisions. The detailed compliance and reporting framework, yet to be notified, remains a key area of uncertainty for the industry. Nevertheless, the changes are expected to make India's data centre tax holiday more accessible and reduce administrative friction.