New budget doubles NRI investment limits, offers 21-year tax holiday for data centre users, and streamlines property sales in bold push for foreign funds.
NEW DELHI – In a sweeping set of reforms, India’s latest budget proposals have launched a powerful dual strategy: to significantly liberalise capital flows from its vast global diaspora and to position the nation as a premier global hub for data and cloud services through unprecedented tax incentives.
For the Global Indian: A Major Investment Leap
The government has dramatically increased investment avenues for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). The individual investment limit in listed Indian companies under the Portfolio Investment Scheme has been doubled from 5% to 10%. Even more impactful, the aggregate limit for all such foreign investors in a single company has been raised from 10% to 24%, allowing for substantially larger pooled investments.
Simultaneously, the process for NRIs selling property in India has been simplified. The cumbersome requirement for a separate Tax Account Number (TAN) has been eliminated; now, a seller’s Permanent Account Number (PAN) alone is sufficient for tax deduction at source, easing a major procedural hurdle.
For Global Firms: A 21-Year Tax Holiday to Build a Data Hub
In a landmark move to attract technology infrastructure and service exports, the budget proposes a 100% tax exemption on profits for any foreign company that provides services outside India using data centre services procured from within India. This incentive, available for a staggering 21-year period until 2047, is a clear bid to make India a global base for cloud and IT-enabled services.
To provide clarity and prevent disputes, a “safe harbour” rule will apply to related-party transactions. Indian entities providing data centre services to foreign affiliates will have only 15% of their gross receipts deemed as taxable income. Furthermore, foreign technicians and experts working on notified projects in India will enjoy a five-year exemption from Indian tax on their foreign income.
Building the Digital Backbone: A $67.5 Billion Push
These tax measures align with a massive physical infrastructure drive. With current data centre capacity at 1.5 GW, the government aims to scale it to 14 GW by 2035. This effort is backed by announced investments totalling $67.5 billion over five years from tech giants:
- Microsoft: $17.5 billion in AI-driven projects
- Amazon: $35 billion in AI and cloud infrastructure
- Google: $15 billion in data centres
- Meta: A new manufacturing base in partnership with Indian conglomerates
Regions like Hyderabad, where power costs are less than half of those in the US, are emerging as high-growth hubs for this expansion.
Hospitality Sector Also in Focus
The budget’s growth narrative extends to tourism and hospitality, targeting job creation. To incentivize new hotel construction—including budget three-star properties—the full capital expenditure (excluding land cost) will be allowable as a tax deduction. This comes as the industry anticipates a surge from a growing middle class and expanding national airport infrastructure.
