Updated 1 February 2026 at 13:09 IST
Union Budget 2026: Cloud Storage Services May Become Cheaper As FM Announces Tax Holiday on Data Centres
FM Sitharaman announced a long-duration tax holiday on data centres set up by foreign companies, a move that can improve project economics, potentially making India a more attractive location for new capacity.
The Union Budget 2026 has put data centres and cloud exports in focus, with Finance Minister Nirmala Sitharaman announcing a long-term tax incentive aimed at attracting global cloud providers to serve international customers from India. The move could lower the cost base for operating cloud infrastructure locally, raising the possibility of more competitive pricing for cloud storage and related services over time.
“I propose to provide a tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centres from India. It will, however, need to provide services to Indian customers through an Indian reseller entity. I also propose to provide a safe harbour of 15 per cent on cost in case the company providing data centre services from India is a related entity,” Sitharaman said in the Lok Sabha.
What the announcement means
The proposal has two parts. First, it offers a tax holiday until 2047 for foreign companies that deliver cloud services to global customers using data centres located in India, effectively encouraging India to become a base for export-oriented cloud delivery. Second, it introduces a “safe harbour” of 15% on cost when the data centre service provider in India is a related entity, a language typically aimed at reducing uncertainty around transfer pricing and how profits are attributed within multinational groups.
Why cloud prices could ease
Cloud storage pricing is shaped by several costs: infrastructure buildout, power, cooling, bandwidth, and taxes on profits. A long-duration tax holiday can improve project economics, potentially making India a more attractive location for new capacity. Over time, greater capacity and competition, especially if multiple global providers expand India-based regions, can translate into sharper pricing and more aggressive enterprise deals.
However, any immediate consumer-facing price cut is not guaranteed. Cloud providers may use the benefit to expand capacity, improve margins, or invest in higher service quality, like uptime, redundancy and faster data access, rather than reduce prices right away.
The India reseller condition
A notable clause is that foreign providers must serve Indian customers through an Indian reseller entity. In practice, this could shape how contracts are structured, how billing happens, and which entity is accountable for compliance and customer support in India, which are factors that matter to enterprises evaluating risk, data handling, and procurement.
Published By : Shubham Verma
Published On: 1 February 2026 at 13:09 IST