The Union Budget 2026-27 presented on February 1 has brought major news for the technology sector. The government is planning a tax exemption of up to 20 years for data center developers under the Draft National Data Centre Policy 2025. This step is part of the vision to make India a $30 trillion economy by 2047 and increase data capacity from 1.5 GW to 14 GW by 2035.
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Who will get the tax benefits?
The proposed benefits are designed for companies setting up large data storage facilities. Currently, units in GIFT City get a 10-year income tax holiday. With the new announcements, industry leaders like SBI have asked to extend these benefits which were ending in March 2026. Foreign companies that lease or operate at least 100 MW capacity might get a special “Permanent Establishment” status. This status helps them work easily within Indian laws.
What are the conditions for the exemption?
The government has clarified that these tax breaks come with specific rules. Companies must meet targets in three main areas:
- Capacity Addition: They must build enough storage space.
- Energy Efficiency: The cooling and power systems must save electricity (PUE).
- Jobs: The project must create employment for people.
Additionally, the Ministry of Electronics and Information Technology has proposed giving credit on GST paid for construction materials and cooling systems. This will lower the cost of building these centers.
