- Cloud services sold outside India won’t be taxed, but local resellers are still to be taxed
- Google, Microsoft and Amazon have all committed billions between now and 2030
- India wants to become a developed nation by 2047, data centers to create jobs
India is set to offer a major new tax incentive to attract AI cloud investment in the country, with the nation’s government confirming there would be zero tax collected on revenues from cloud services sold outside until until 2047 – so long as workloads run from Indian data centers.
The policy was announced by Finance Minister Nirmala Sitharaman in a bid to boost the Indian economy, positioning data centers as strategic industry rather than just back-end infrastructure.
The hope is that the tax incentive would cause more foreign companies to set up bases in India, creating more jobs and positioning India as a global data center hub.
India wants foreign cloud companies to set up tax-free
The change in policy reflects part of an ongoing trend whereby Big Tech has already committed to spending billions developing data centers in India.
This includes Google, which has pledged $15 billion by 2030, Microsoft committed to $17.5 billion by 2029 and Amazon said it would spend $35 billion by 2030, all to improve AI and data center infrastructure.
More importantly, the incentive applies to overseas companies, and domestic sales must go through locally incorporated resellers who are taxed per normal Indian customs.
However, big investments will need to go towards much more than just campus infrastructure, especially with tax-free allowances. Critics are worried about patchy power supply, high electricity costs and water scarcity, not to mention the impacts that data centers’ high usages will have on local communities.
The 21-year tax incentive’s timeline is an important one, because Prime Minister Narendra Modi has set out goals for the country to become a developed nation by 2047, a scheme labelled Viksit Bharat (Developed India) (via PMIndia).
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