- Cloud services sold outside India are not taxed, but local resellers are still subject to tax
- 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 to the country, with the country’s government confirming that revenue from cloud services sold abroad would not be taxed until 2047 – as long as the workload flows from Indian data centres.
The policy was announced by Finance Minister Nirmala Sitharaman in a bid to boost the Indian economy by positioning data centers as strategic industry rather than just back-end infrastructure.
The hope is that the tax incentive will prompt more foreign companies to set up bases in India, create more jobs and position India as a global data center.
India wants foreign cloud companies to set up tax-free
The change in policy reflects part of an ongoing trend in which Big Tech has already committed to spending billions to develop 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 dealers, who are taxed at normal Indian customs duties.
However, major investment must go into much more than just campus infrastructure, especially with tax-free allowances. Critics worry about erratic power supply, high electricity costs and water shortages, not to mention the impact that data centers’ high consumption will have on local communities.
The timeline for the 21-year tax incentive is important because Prime Minister Narendra Modi has set targets for the country to become a developed nation by 2047, a scheme labeled Viksit Bharat (Developed India) (via PMIndia).
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