The 2026 budget proposed to provide a tax holiday up to 2047 to foreign companies, in recognition of the need to enable them to have critical infrastructure and boost investment in data centres.
Kakinada: Information Technology companies have urged finance minister Nirmala Sitharaman to extend the Tax Holiday to the domestic IT sector too, to encourage these units.
This, they said, would help increase their IT exports. They also requested the government to set up data recovery centres in Tier-II cities like Kakinada, Rajamahendravaram, Amaravati and Tirupati.
The 2026 budget proposed to provide a tax holiday up to 2047 to foreign companies, in recognition of the need to enable them to have critical infrastructure and boost investment in data centres. This is applicable to such companies that provide services abroad by procuring data centre services in India.
Sale of such services to Indian users shall be made though an Indian reseller entity and taxed appropriately.
It is also proposed to provide a safe harbour of 15 per cent to the resident entity providing data centre services to a related foreign company that is providing cloud services to any part of the world outside India.
Welcoming the Tax Holiday to Data Centres, the IT Association of Andhra Pradesh’s state vice president Kovvuri Krishna Reddy told Deccan Chronicle, “IT sector is in doldrums due to AI and other advanced technologies. In these circumstances, the tax holiday should be extended to domestic IT firms too. This would be more beneficial to them and their services would be extended further.”
He also said that a data recovery centre would be set up in Visakhapatnam. The sub-centres should be set up in Tier-II cities like Kakinada, Rajamahendravaram, Amaravati and Tirupati.
In the event of national calamities, these Tier-II cities can become handy, if they have data recovery centres, it was stressed.
Krishna Reddy said Kakinada is suitable for establishing subsea cable gateways as Amaravati, Rajamahendravaram and Tirupati are having airports. There are four IT divisions like IT services, IT enabled services, knowledge processing and outsourcing division; and R&D contracting companies.
The Union government, he said, is bringing all these under one umbrella. However, there are different levels of profitability in the company. After the coming up of the Google Data Centre to Visakhapatnam, several big companies like Reliance, Aadani etc are also aiming to open their centres at Visakhapatnam, he said.
Reddy said if the central government extends all benefits it provides to foreign companies to domestic IT companies and IT centres, it would be very helpful to them.
