Budget 2026: India’s 'Digital Fortress' Gambit – Tax-Free Clouds till 2047

Market snapshot: The Union Budget 2026-27 has effectively designated Data Centers (DCs) as the new sovereign infrastructure. By eliminating tax on foreign cloud revenue until 2047 and raising the IT Safe Harbour threshold by nearly 7x to ₹2,000 Cr, the government is aggressively positioning India as the 'Backend for the World'.

Summary: Finance Minister Sitharaman announces a zero-tax regime for foreign cloud providers using Indian DCs until 2047. IT Safe Harbour threshold hiked to ₹2,000 Cr with a unified 15.5% margin, significantly reducing litigation risks for mid-cap tech firms.

Key Takeaways

• Tax Holiday 2047: Foreign firms using Indian DCs for global services pay ₹0 tax.
• Safe Harbour Expansion: Eligibility threshold jumped from ₹300 Cr to ₹2,000 Cr.
• Unified Margin: Standard 15.5% margin for IT services to curb transfer pricing disputes.
• CapEx Catalyst: Direct beneficiary status for specialized hardware players like Netweb and E2E.

SAHI Perspective

This is a structural re-rating event for Indian infrastructure players. The tax shield effectively lowers the Total Cost of Ownership (TCO) for global hyperscalers hosting in India, likely triggering a capex super-cycle. We expect a rotation from generic IT services into 'hard' digital infra stocks (DC operators, specialized server manufacturers).

Closing Insight

The 'Digital Fortress' is now open for business. The tax holiday is not just an incentive; it's a geopolitical magnet for data sovereignty. Watch for order book explosions in DC construction and server manufacturing by Q2 2026.

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