India’s Bold Move: Zero Taxes Until 2047 to Attract Global AI Investments
In a strategic effort to position itself as a global hub for artificial intelligence (AI) infrastructure, India has unveiled an ambitious tax incentive plan. The government is offering foreign cloud service providers a tax holiday—effectively zero taxes—on revenues generated from services sold outside India, provided these services are operated from data centers within the country. This tax exemption is set to last until 2047, marking a significant commitment to fostering AI development over the next two decades.
Strategic Tax Incentives to Attract AI Investments
Announced by Finance Minister Nirmala Sitharaman during the annual budget presentation, this initiative aims to attract substantial foreign investment in India’s burgeoning AI sector. The tax holiday applies exclusively to revenues from cloud services sold internationally and managed from Indian data centers. Domestic sales, however, will be subject to local taxation through Indian-incorporated resellers. Additionally, the budget proposes a 15% cost-plus safe harbor for Indian data center operators providing services to related foreign entities, further enhancing the attractiveness of the Indian market for global tech giants.
Global Tech Giants Eye India’s AI Potential
This policy comes at a time when leading U.S. cloud providers, including Amazon, Google, and Microsoft, are aggressively expanding their global data center capacities to meet the escalating demand for AI workloads. India’s vast pool of engineering talent, coupled with a rapidly growing demand for cloud services, positions the country as a compelling alternative to traditional tech hubs in the U.S., Europe, and parts of Asia.
In recent years, these tech behemoths have made significant financial commitments to India’s AI and cloud infrastructure:
– Google: In October 2025, Google announced a $15 billion investment to establish an AI hub and expand its data center infrastructure in India, marking its largest commitment in the country to date.
– Microsoft: In December 2025, Microsoft revealed plans to invest $17.5 billion by 2029 to enhance its AI and cloud footprint in India, focusing on new data centers, infrastructure development, and training programs.
– Amazon: Also in December 2025, Amazon committed an additional $35 billion to its Indian operations by 2030, bringing its total planned investment to approximately $75 billion, aimed at expanding both its retail and cloud services.
Domestic Initiatives Bolstering AI Infrastructure
India’s domestic data center industry is also scaling up to meet global demand. In November 2025, Digital Connexion—a joint venture backed by Reliance Industries, Brookfield Asset Management, and Digital Realty Trust—announced an $11 billion investment to develop a 1-gigawatt, AI-focused data center campus in Andhra Pradesh. Spanning approximately 400 acres in Visakhapatnam, this project is among the largest of its kind in India, highlighting the country’s commitment to building AI-ready infrastructure.
Similarly, the Adani Group disclosed plans in December 2025 to invest up to $5 billion, in partnership with Google, to develop AI data centers in India. These initiatives underscore the growing interest from both domestic and international investors in establishing a robust AI ecosystem within the country.
Challenges in Scaling AI Infrastructure
Despite these ambitious plans, scaling up data center capacity in India presents several challenges. Issues such as inconsistent power availability, high electricity costs, and water scarcity pose significant constraints for energy-intensive AI operations. These factors could potentially slow down construction timelines and increase operational costs for cloud service providers.
Rohit Kumar, founding partner of New Delhi-based The Quantum Hub, noted, The announcements on data centers signal that they are being treated as a strategic business sector rather than just back-end infrastructure. This perspective highlights the government’s recognition of data centers as critical components of India’s digital economy and its commitment to addressing these infrastructural challenges.
Broader Implications for India’s AI Strategy
India’s proactive approach to attracting AI investments aligns with its broader strategy to become a global leader in technology and innovation. By offering long-term tax incentives and fostering a conducive environment for AI development, the country aims to:
– Enhance Digital Infrastructure: Develop state-of-the-art data centers to support AI workloads and cloud services.
– Attract Foreign Investment: Encourage global tech companies to establish and expand their operations in India.
– Foster Innovation: Create opportunities for domestic startups and enterprises to collaborate with international players, driving innovation and technological advancements.
This strategic focus is evident in other recent initiatives, such as the proposal to charge AI companies like OpenAI and Google for training on copyrighted content, ensuring that creators are compensated for their work. Additionally, India’s decision to refrain from regulating AI growth, as announced in April 2023, reflects a commitment to fostering innovation while addressing ethical concerns and risks associated with AI development.
Conclusion
India’s offer of zero taxes through 2047 for foreign cloud providers operating AI workloads from Indian data centers is a bold and strategic move to position the country as a global AI powerhouse. While challenges remain in scaling infrastructure, the combination of substantial foreign investments, domestic initiatives, and supportive government policies sets the stage for India to play a pivotal role in the future of AI development and deployment.
