Proposed tax changes would extend exemptions for foreign companies supplying machinery and components to Indian contract manufacturers, supporting Apple’s expanding iPhone production base and strengthening India’s electronics export ambitions.
India has proposed extending key tax exemptions for foreign companies supplying machinery and components to contract manufacturers until 2041, a move that could provide a significant boost to Apple as the technology giant rapidly expands iPhone production in the country.
The proposed changes would give foreign companies greater tax certainty when providing high-end equipment to their manufacturing partners in India, reducing the risk that ownership of such machinery could expose their broader business income to Indian taxes.
The tax relief would run until March 31, 2041, extending an exemption introduced earlier this year that was initially scheduled to expire in 2031.
The move is particularly significant for Apple, which has been diversifying its manufacturing footprint beyond China and increasing its reliance on India as a major production hub. India is expected to account for around 26 per cent of global iPhone production in 2026, compared with just 6 per cent four years earlier, according to Counterpoint Research.
Tax certainty for contract manufacturing
Apple had previously pushed for changes to India’s tax framework over concerns that machinery supplied to contract manufacturers could create a so-called “business connection” in the country.
More from BusinessSuch a classification could potentially expose a portion of the company’s iPhone-related profits to taxation in India simply because it owns machinery used by local contract manufacturers.
The proposed amendments seek to remove that uncertainty by extending tax exemptions for foreign companies providing equipment to manufacturers producing mobile phones, tablets, laptops, hearing devices and wearable electronics.
The changes would need approval from both houses of Parliament before taking effect.
Tax relief for storing electronics components
The government has also proposed exempting income earned by foreign companies from storing and supplying components used by Indian contract manufacturers until 2041.
The provision would apply to factories and warehouses located in customs-bonded areas, which are treated as being outside India’s customs territory for certain purposes.
The structure is aimed primarily at export-orientated manufacturing. Products sold in the domestic market from these facilities would still attract applicable import duties.
The changes could allow global electronics companies to maintain machinery and critical component inventories closer to their Indian manufacturing operations, reducing supply-chain risks and improving production flexibility.
The proposals come as India seeks to establish itself as a major alternative electronics manufacturing base amid global efforts to diversify supply chains away from excessive dependence on China.
Data centre tax rules also eased
Alongside the manufacturing measures, India has proposed making it easier for foreign companies using Indian data centres to qualify for tax exemptions.
The government had earlier announced a tax exemption until 2047 for foreign companies using data centres in India to provide services to overseas customers. The measure was designed to address concerns that using Indian infrastructure could potentially expose companies’ global income to domestic taxation.
Under the latest proposal, Indian partners would be permitted to lease data centres rather than being required to own them.
The change could reduce capital requirements and lower barriers to entry for smaller and mid-sized data centre operators as India seeks to attract greater investment into digital infrastructure.
Tax break proposed for diamond trade
Separately, the government has proposed a 15-year tax exemption for foreign diamond miners and traders selling rough diamonds through designated trading zones in India.
The measure is aimed at strengthening India’s position in the global diamond trade. The country is already the world’s largest centre for diamond cutting and polishing.
Taken together, the proposed changes signal a broader effort by the government to use tax certainty to attract global manufacturing, technology infrastructure and trading activity while strengthening India’s position in international supply chains.
