---
title: "India Offers Long-Term Tax Shields to Deepen Tech Manufacturing Ecosystem"
url: https://projectchintan.com/article/india-offers-long-term-tax-shields-to-deepen-tech-manufacturing-ecosystem-0tt8n
publisher: Project Chintan
author: Project Chintan Newsroom
section: Business
published: 2026-08-03T16:38:38.000Z
modified: 2026-08-03T19:01:16.020Z
language: en-IN
---

# India Offers Long-Term Tax Shields to Deepen Tech Manufacturing Ecosystem

The Indian government has proposed extending tax exemptions until 2041 for foreign entities supplying machinery to local contract manufacturers. This strategic shift aims to secure supply chains for giants like Apple while boosting electronics exports.

## Key takeaways

- India proposes extending tax exemptions until 2041 for foreign companies supplying machinery to contract manufacturers.
- The policy change addresses Apple's concerns regarding the taxation of machinery ownership as a business connection.
- Counterpoint Research projects India will manufacture 26% of all iPhones by 2026, up from 6% in 2022.
- New rules allow data centers to be leased rather than owned by Indian partners to qualify for tax exemptions through 2047.
- A 15-year tax exemption is planned for foreign diamond miners selling rough stones through designated Indian trading zones.

## New Fiscal Policy Targets Foreign Equipment Ownership

India is moving to solidify its status as a global electronics hub by proposing an extension of tax exemptions for foreign firms that supply machinery to domestic contract manufacturers. Under the draft amendments, these tax breaks will now remain in effect until March 31, 2041. The proposal follows aggressive lobbying by Apple, which sought to ensure that owning high-end production equipment located in India would not be classified as a business connection. Such a classification could have exposed the tech giant's global iPhone profits to Indian taxation.

This legislative shift arrives as Apple aggressively diversifies its production lines away from China. Industry data from Counterpoint Research indicates India is on track to produce 26% of global iPhones by 2026, a massive leap from just 6% in 2022. The new rules apply to a broad spectrum of hardware, including mobile phones, laptops, tablets, and wearable electronic devices.

## Customs-Bonded Incentives and Supply Chain Security

The proposed bill further incentivizes the storage of electronic components by exempting foreign firms from income tax on parts held for contract manufacturers. These activities must take place within customs-bonded areas, which are legally treated as being outside India’s customs territory. While these facilities favor the export market—since domestic sales from these zones still incur import duties—they offer a buffer against global logistical volatility.
- Foreign income from storing and providing electronic components is exempt until 2041.
- The policy specifically targets factories and warehouses in specialized bonded zones.
- Riaz Thingna, a partner at Grant Thornton Bharat, noted that these changes provide tax certainty and help mitigate disruptions caused by international trade tensions.

## Data Center Flexibility and Diamond Trade Expansion

Beyond hardware manufacturing, the government is refining its approach to digital infrastructure and precious gems. New amendments will allow foreign companies using Indian data centers to qualify for tax exemptions even if the local partner leases the facility rather than owning it outright. This adjustment is expected to lower capital barriers for small and medium-sized enterprises entering the digital services sector. The existing tax exemption for these data center activities remains valid until 2047.

In a separate move to bolster its position as a global leader in gem processing, India has also proposed a 15-year tax exemption for foreign diamond miners. This applies to the sale of rough diamonds through designated trading zones, supporting a sector where India already dominates the cutting and polishing market.

Source: The Hindu — Economy

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Canonical: https://projectchintan.com/article/india-offers-long-term-tax-shields-to-deepen-tech-manufacturing-ecosystem-0tt8n
Reported from: The Hindu — Economy