Data Center Industry To See Major Boost With Tax Holiday, Say Experts
Move to spur data-centre investment and boost Hyderabad’s tech hub
Hyderabad: The technology and data centre industry in Hyderabad, and across India, is expecting a major boost after the Union government announced a tax holiday for foreign cloud service providers until 2047.
In her Budget speech, Finance Minister Nirmala Sitharaman said foreign cloud companies that use Indian data centres to offer services globally will be eligible for a tax holiday until 2047. This allows firms to be exempt from corporate tax on profits earned from cloud services delivered from India for around 20 years.
Industry leaders say the move could accelerate investment in data centre infrastructure, particularly in fast-growing technology hubs like Hyderabad. With Hyderabad hosting many tech firms, global capability centres and cloud computing operations, analysts believe the tax break will encourage more companies to build or expand data centres locally, creating jobs and boosting the local economy.
Data centres are critical facilities that store and process large amounts of digital information. They support services such as online banking, streaming, e-commerce and AI tools. India’s data center market has been expanding rapidly, driven by increasing demand for cloud computing and digital services.
Puneet Chandok, president of Microsoft India, said, “India is no longer just a user of technology; we are its engine. The 2026 Budget reframes compute as capital, providing the long-term certainty needed to treat digital infrastructure as a strategic national asset. The Government is signalling its commitment to a technology-led economy. The landmark tax holiday until 2047 provides the long-term policy certainty required to recognise digital infrastructure as a strategic national asset.”
Tejesh Kodali, group chairman of Hyderabad-based Blue Cloud Softech Solutions, said, “The proposed tax holiday till 2047 for foreign cloud service providers setting up data centres in India, supported by a 15 per cent safe harbour framework for related-party data services, strengthens policy certainty for global investors.”
He said “By aligning capital investment, fiscal stability, and regional strengths with strategic resources, the budget reinforces a sustained growth narrative, positioning India as a credible global hub for advanced manufacturing and digital infrastructure.”
The new tax holiday aligns with the government’s broader strategy to make India a global hub for digital infrastructure and cloud services. It is also expected to help India compete more effectively with other countries that offer incentives to attract foreign investment in technology.
