The Union Budget 2026–27, presented by Finance Minister Nirmala Sitharaman, marks a decisive push towards building India as a global hub for Artificial Intelligence, cloud computing, and semiconductors. Union Minister for Electronics and Information Technology, Railways and Information & Broadcasting Ashwini Vaishnaw said the Budget lays a strong and long-term foundation for digital infrastructure, advanced manufacturing, and talent development, fully aligned with the vision of Viksit Bharat.
AI Data Centres Get Long-Term Policy Certainty
Highlighting the growing importance of digital infrastructure, Shri Vaishnaw said AI data centres form the backbone of the AI ecosystem. He noted that investments worth nearly USD 70 billion are already underway in India, with investment announcements of around USD 90 billion, underscoring strong global interest in India’s digital economy.
To further accelerate investments, the Budget proposes a tax holiday till 2047 for foreign companies providing global cloud services using India-based data centres. These companies will serve Indian customers through Indian reseller entities. Additionally, a safe harbour of 15% on cost has been proposed where the Indian data centre service provider is a related entity.
According to the Minister, this long-term policy framework up to 2047 positions India among the world’s most attractive destinations for AI and cloud infrastructure investments.
India Semiconductor Mission (ISM) 2.0 Announced
A major highlight of the Budget is the launch of India Semiconductor Mission (ISM) 2.0, building on the success of ISM 1.0, which laid the foundation of India’s domestic semiconductor industry.
Shri Vaishnaw said ISM 2.0 will focus on:
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Design and manufacturing of semiconductor equipment in India
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Manufacturing of semiconductor materials
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Creation of a large-scale chip design ecosystem
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Deepening talent development and skilling initiatives
For FY 2026–27, a provision of ₹1,000 crore has been made for ISM 2.0, signalling the Government’s commitment to long-term self-reliance in semiconductors.
Electronics Components Manufacturing Scheme Scaled Up
The Union Minister said the Electronics Components Manufacturing Scheme (ECMS) has received an overwhelming response from industry. Against an expectation of 50–55 applications, the scheme has already attracted 149 applications, reflecting strong industry confidence.
To sustain this momentum, the Budget has enhanced the scheme’s allocation from ₹22,000 crore to ₹40,000 crore. Shri Vaishnaw said the expanded outlay will strengthen domestic value chains, reduce import dependence, and scale up electronics manufacturing across the country.
IT Services Simplification and Tax Certainty
Recognising IT services as India’s largest exported service sector, with exports exceeding USD 220 billion, the Budget introduces major reforms to improve tax certainty and ease of doing business.
Key measures include:
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Grouping all IT and IT-enabled services—including software development, ITES, KPO, and contract R&D—under a single category of Information Technology Services
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A common safe harbour margin of 15.5%
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Increasing the safe harbour threshold from ₹300 crore to ₹2,000 crore
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Automated, rule-based approvals for faster processing
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Fast-tracking of Unilateral Advance Pricing Agreements (APAs) and extension of modified returns facility for entities entering into APAs
These reforms are expected to enhance India’s attractiveness for Global Capability Centres (GCCs) and multinational IT service providers.
Conclusion: Union Budget
Union Budget 2026–27 presents a coherent, future-ready strategy for India’s electronics, AI, cloud, and semiconductor ecosystem. With long-term tax incentives for data centres, the launch of Semiconductor Mission 2.0, a sharply enhanced electronics manufacturing scheme, and far-reaching IT tax reforms, the Budget strengthens India’s position as a global digital and technology powerhouse. As Shri Ashwini Vaishnaw noted, these measures will not only attract global investment but also deepen domestic manufacturing, innovation, and talent—key pillars of Aatmanirbhar and Viksit Bharat.
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Source: PIB
