Govt proposes easier compliance for foreign firms using Indian data centres
The Taxation and other laws (Amendment) Bill, 2026, introduced in the Lok Sabha on Tuesday, reduces reporting requirements for foreign companies which wish to claim the tax holiday announced in the FY27 Budget. It also ensures that genuine data centre businesses get started and operate with far less friction.
In a move to streamline compliance for foreign firms utilizing Indian data centres, the government introduced the Taxation and other laws (Amendment) Bill, 2026 in the Lok Sabha. The amendment seeks to eliminate the need for separate government notification from both foreign cloud companies and the Indian data centres they source services from. This removal of a major approval hurdle aims to simplify the process and boost ease of doing business.
Announced in the Union Budget 2026-27, the Bill provides a 20-year tax holiday on foreign companies' global income for procuring data centre services in India. This tax treatment for both data centre setup and service procurement ensures a level playing field for global and Indian entities. The Finance Ministry revealed that the Bill removes multiple approval steps by doing away with separate government notifications for both parties involved.
The income tax department clarified that foreign cloud service providers and Indian data centre providers must furnish prescribed information in the required form. The removal of notification conditions for both parties allows Indian data centres to operate on a leased basis, expanding the ecosystem for global cloud players and potentially facilitating large AI data cities, attracting significant investment.
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