New Delhi, Feb 2 (PTI) The proposed long-term tax holiday for foreign cloud players using data centres in India is set to meaningfully strengthen the country's proposition as preferred destination for global
digital infrastructure investments, Rajesh Nambiar, President of IT body Nasscom has said.
The comment comes against the backdrop of Union Budget's big thrust on tech, with tax exemptions (till 2047) for foreign firms using data centres located in India, as well as rationalisation of taxation framework for IT and GCC firms with a uniform safe harbour margin of 15.5 per cent and more liberal thresholds.
"The tax holiday for cloud service providers will meaningfully strengthen our proposition as preferred global destination for datacentres, and all digital infrastructure investments," Nambiar told PTI in a post-Budget interview.
From October-December, Google announced investment of USD 15 billion, Microsoft USD 17.5 billion, Amazon USD 35 billion and Digital Connexion USD 11 billion in AI infrastructure, including data centres in India.
The government expects investment in data centres to cross USD 200 billion, about Rs 18.33 lakh crore, Electronics and IT Minister Ashwini Vaishnaw said on Sunday, noting that the sector has received an investment proposal of USD 90 billion, of which USD 70 billion has started moving into the construction phase.
In simple terms, data centres are secure facilities filled with powerful computers and servers that store, process and transmit digital data behind services ranging from emails and banking all the way to streaming and cloud platforms.
The data centres, which resemble fortified bases, run on specialised infrastructure, from uninterrupted power supply to advanced cooling and round-the-clock monitoring (even one minute of downtime can affect millions of users).
With AI, cloud computing and digital payments growing, data centres are becoming as critical as roads and power plants, forming the backbone of India’s digital economy.
Nambiar said: "I believe the tax holiday will have a major impact on what we do in this space (datacentres) as we move forward". The utilisation of domestic data centres will go up significantly, he observed.
For GCCs ecosystem, the Budget rings in a "significant moment", he said pointing to a slew of announcements, including expansion of threshold for IT services safe harbour to Rs 2,000 crore from Rs 300 crore.
"These mark a decisive shift from process-heavy compliance to governance-based to clarity and trust," he said.
According to the Nasscom top executive, unified 15.5 per cent safe harbour margin for all sub-sets of IT services will bring "simplicity". For GCCs operating in cross-border environment, it "materially improves certainity", reduces administrative overheads and strengthens long-term investment prospects.
It is pertinent to mention that Finance Minister Nirmala Sitharaman on Sunday proposed to club various inter-connected sub-segments of IT including software development services, IT enabled services, knowledge process outsourcing services and others, under a single category with common safe harbour margin of just 15.5 per cent, a move that seeks to boost India's sheen in global infrastructure investments.
"Earlier, the companies operating in different categories had different rates, now that has been unified at 15.5 per cent. This have been long-term ask from Nasscom and we are glad that the FM has addressed it in the Budget," he said.
The fast-tracking of the Advance Pricing Agreement (APA) addresses persistent concern around dispute timelines, and bring tax predictability.
"Faster APAs also mean less litigation and sharper focus on business... these provisions will not only help GCCs but any MNC doing business in India," he said.
Yezdi Nagporewalla, CEO, KPMG in India noted incentives like the tax holiday for global cloud and data centre services further strengthen India’s position as a reliable digital and technology hub.
"The emphasis on advancing strategic and emerging sectors, such as ISM 2.0 for semiconductors, a long-term strategy for rare earth ecosystems and tax break for hyperscalers investment in India, reflects a deliberate effort to transform potential into tangible outcomes through resilient, high-value domestic capabilities," Nagporewalla said adding these steps are essential for decreasing import dependence and bolstering India’s role in global value chains.
Flipkart Group CEO, Kalyan Krishnamurthy said Union Budget's focus on digital public infrastructure, simpler compliance, MSME financing, and productivity-enhancing infrastructure strengthens the foundations of a more inclusive and formal digital economy". PTI MBI MBI ANU
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