The Union Budget 2026–27 lays a strong foundation for India’s Artificial Intelligence (AI), data centre infrastructure, and semiconductor ecosystem, with a focus on long-term investment incentives, domestic manufacturing, and digital competitiveness. Key announcements include tax holidays till 2047, Semiconductor Mission 2.0, and expansion of electronics manufacturing support, signalling a strategic push towards a technology-driven economy.
The Budget reflects a forward-looking digital industrial strategy, positioning India as a global hub for AI infrastructure, cloud computing, and semiconductor manufacturing.
A major highlight is the provision of a tax holiday till 2047 for foreign companies operating cloud and AI data centres from India, which is expected to attract long-term global investments. With ongoing investments of USD 70 billion and announced investments of USD 90 billion, India is emerging as a key destination for data centre infrastructure. The introduction of a 15% safe harbour margin further enhances tax certainty, making India a competitive location for global cloud service providers.
The launch of India Semiconductor Mission (ISM) 2.0 marks a significant step towards deepening domestic capabilities in semiconductor design, manufacturing, and materials ecosystem. With an allocation of ₹1,000 crore for FY 2026–27, the initiative aims to build a self-reliant semiconductor ecosystem, reduce import dependence, and strengthen technological sovereignty.
The expansion of the Electronics Components Manufacturing Scheme (ECMS), with allocation increased from ₹22,000 crore to ₹40,000 crore, reflects strong industry response and policy continuity. The receipt of 149 applications against expected 50–55 indicates rising investor confidence and growing domestic manufacturing potential.
In addition, reforms in the IT services sector, including safe harbour provisions with 15.5% margin and increased threshold from ₹300 crore to ₹2,000 crore, simplify compliance and enhance ease of doing business. The move to group all IT services under a single category improves regulatory clarity. Fast-tracking of Advance Pricing Agreements (APA) further ensures tax certainty for global IT firms.
Overall, the policy framework demonstrates a convergence of digital infrastructure, manufacturing, and regulatory reforms, aimed at transforming India into a global technology powerhouse. The integration of AI, cloud, and semiconductor ecosystems is crucial for achieving digital sovereignty, economic growth, and global competitiveness.
Updated - 01 February 2026; 09:36 PM | PIB