New Tax Bill targets data centres, electronics manufacturing: Can India attract more global investment?

The Taxation and Other Laws (Amendment) Bill, 2026, passed by the Lok Sabha, seeks to use tax policy to attract long-term foreign investment into two strategic sectors—data centres and electronics manufacturing. The legislation replaces the June 5 ordinance and introduces changes aimed at providing greater policy certainty to global companies.

Electronics Manufacturing

The Bill extends until March 31, 2041, the income-tax exemption available to foreign companies engaging Indian contract manufacturers to produce specified electronic goods. It also provides a 15-year tax exemption to foreign companies storing electronic components in customs-bonded warehouses for supply to Indian contract manufacturers.

For electronics manufacturers, the longer tax horizon could support decisions involving large capital expenditure and global supply chains. Ashutosh Gupta, Director of Sales & Marketing, Summercool Home Appliances Ltd., said the amendment provides greater policy clarity and a more investment-friendly environment for an industry dependent on long-term capital commitments.

He said greater attractiveness for electronics production and foreign investment could gradually lead to capacity expansion, increased localisation of components and a stronger supplier ecosystem. The impact, he added, could extend beyond electronics through improved infrastructure, skilled employment and stronger domestic value chains.

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Naman Shah, Managing Director of LeSol Group, said the Bill's extended incentives for foreign electronics manufacturers address a major concern for international investors and supply-chain partners: predictability in the tax regime.

According to Shah, the changes could encourage greater collaboration between global technology companies and Indian producers, helping strengthen supply-chain resilience, competitiveness and the ability to scale production.

Data centre investment

Data centres are another major focus of the legislation. The Bill relaxes conditions for foreign companies using Indian data centres by removing approval and notification requirements. It also permits data centres to operate through leased infrastructure rather than requiring direct ownership.

The changes could make it easier for global cloud and technology companies to expand their presence in India and deploy capacity more quickly. Manoj Dhanda, Founder and CEO, Utho Cloud, said recognition of leased infrastructure and removal of approval bottlenecks could accelerate investment and strengthen India's digital infrastructure, including faster deployment of hyperscale data-centre capacity.

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However, Dhanda said India's opportunity extends beyond building physical capacity. The larger strategic issue, he said, is ownership and control of the digital infrastructure powering critical workloads. For India, digital sovereignty would require control over the wider cloud stack, including compute, storage, networking and virtualisation.

This creates a parallel opportunity for domestic cloud and infrastructure providers as foreign companies expand capacity. The policy push could therefore support both greater data-centre investment and the development of India's domestic digital infrastructure ecosystem.

Can the reforms bend the way?

Taken together, the reforms signal a broader strategy of using tax certainty and regulatory flexibility to attract global capital while building domestic capabilities. Electronics manufacturing could benefit through longer-term investment and localisation, while data-centre reforms could accelerate digital infrastructure deployment.

The legislation also comes as India seeks to deepen its role in global manufacturing and digital infrastructure. Longer tax visibility could make it easier for multinational companies to plan investments, while relaxed operating conditions may reduce some of the procedural hurdles associated with setting up data-centre capacity.

The key test, however, will be whether these tax and regulatory changes translate into actual capital commitments, additional manufacturing capacity, deeper local supply chains and stronger domestic control over critical digital infrastructure.

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