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Any foreign company which provides services in any part of the world outside India by procuring data centre services from India will have a 100% tax exemption on its profits
Question: I read in the Khaleej Times that NRIs, overseas citizens of Indian origin and foreign companies have been given some benefits in the budget proposals announced on Sunday. Can you please throw some more light on these measures?
ANSWER: The government has responded to the request of NRIs and persons of Indian origin to permit them to invest in equity instruments of listed Indian companies through the portfolio investment scheme. The finance minister has gone further and increased the investment limit for an individual investor under the scheme to 10 per cent from the current level of 5 per cent. The overall investment limit for all NRIs and persons of Indian origin has been increased to 24 per cent from the current level of 10 per cent. Another announcement made is that when a non-resident sells his immovable property to a resident Indian, his permanent account number would be sufficient for deducting tax at source. At present, the non-resident is required to submit a tax account number which was time consuming and tedious. This has now been done away with.
As far as foreign companies are concerned, it is proposed that any foreign company which provides services in any part of the world outside India by procuring data centre services from India will have a 100 per cent tax exemption on its profits. This exemption will be available for the next 21 years up to 2047. Further, to ensure certainty in taxation and avoid any litigation, an Indian resident entity providing data centre services to a related foreign company which provides cloud services in any part of the world will be governed by the safe harbour rule whereby 15 per cent of the gross receipts will be deemed to be the taxable income. Foreign technicians and experts who visit India for rendering services under a notified scheme will be totally exempt from tax for five years on their foreign income though such technicians may be resident under the Indian tax laws. These provisions are meant to make India a global hub for provision of services from India as the entities or individuals would be totally outside the purview of Indian taxation for the stipulated period of time.
Question: Currently India is relying on data servers which are located in foreign countries. What steps are being taken to ensure data security?
ANSWER: Though India is the largest consumer of data in the world, its data centre capacity is at present just 1.5 GW. To deal with this challenge, the government is taking steps to build the capacity to 14 GW by 2035 by inviting companies like Microsoft, Amazon, Google and Meta to invest. Microsoft is proposing to invest $17.5 billion and Amazon $35 billion in AI-driven projects across India. Google has proposed to invest $15 billion in data centres. Thus an amount of $67.5 billion will be spent over the next five years. Further, Meta will set up a manufacturing base in collaboration with the largest two Indian groups.
Currently, 90 per cent of data centre capacity is located in Mumbai, Hyderabad, Chennai, Bengaluru and Pune due to availability of power and skilled technical personnel. The fastest growing area is in Hyderabad where data parks are connected to multiple energy sources and power is available at less than 50 per cent of the electricity cost in America. A new tax policy for data centres, both direct and indirect, is on the anvil which is necessary as the value of the digital economy is expected to grow to 20 per cent of GDP by March 2030.
Question: With the large population growth, India needs to generate jobs in the tourism and hospitality sectors. Are there prospects for more hotels being put in place in the next five years? My friends and I are interested in setting up a budget three star hotel.
ANSWER: Every hotel chain in India, both domestic and international, is gearing up to add additional properties because they believe that the hospitality industry in India is just getting started. Apart from the fact that the GDP growth rate is estimated to be around 7 per cent as projected by the International Monetary Fund, the main strength of India lies in the fact that the middle class will grow by an additional 400 million people in the next 15 years. The number of additional airports coming up will also give a boost, which will be supplemented by additional aircraft being acquired by airlines in India.
Most international chains are contemplating setting up new hotels with or without Indian partners. If you decide to set up a 3-star hotel, the capital expenditure, excluding the cost of land, is allowed as a deduction from the taxable profits under section 46 of the Income Tax Act, 2025. Pre-operative expenses which are capitalised in the books of account will be allowed as deduction in the financial year in which the business of running the hotel commences. Several State Governments are also giving fiscal concessions to boost the tourism sector as it generates job opportunities and employment for hospitality professionals.
Any foreign company which provides services in any part of the world outside India by procuring data centre services from India will have a 100% tax exemption on its profits
Question: I read in the Khaleej Times that NRIs, overseas citizens of Indian origin and foreign companies have been given some benefits in the budget proposals announced on Sunday. Can you please throw some more light on these measures?
ANSWER: The government has responded to the request of NRIs and persons of Indian origin to permit them to invest in equity instruments of listed Indian companies through the portfolio investment scheme. The finance minister has gone further and increased the investment limit for an individual investor under the scheme to 10 per cent from the current level of 5 per cent. The overall investment limit for all NRIs and persons of Indian origin has been increased to 24 per cent from the current level of 10 per cent. Another announcement made is that when a non-resident sells his immovable property to a resident Indian, his permanent account number would be sufficient for deducting tax at source. At present, the non-resident is required to submit a tax account number which was time consuming and tedious. This has now been done away with.
As far as foreign companies are concerned, it is proposed that any foreign company which provides services in any part of the world outside India by procuring data centre services from India will have a 100 per cent tax exemption on its profits. This exemption will be available for the next 21 years up to 2047. Further, to ensure certainty in taxation and avoid any litigation, an Indian resident entity providing data centre services to a related foreign company which provides cloud services in any part of the world will be governed by the safe harbour rule whereby 15 per cent of the gross receipts will be deemed to be the taxable income. Foreign technicians and experts who visit India for rendering services under a notified scheme will be totally exempt from tax for five years on their foreign income though such technicians may be resident under the Indian tax laws. These provisions are meant to make India a global hub for provision of services from India as the entities or individuals would be totally outside the purview of Indian taxation for the stipulated period of time.
Question: Currently India is relying on data servers which are located in foreign countries. What steps are being taken to ensure data security?
ANSWER: Though India is the largest consumer of data in the world, its data centre capacity is at present just 1.5 GW. To deal with this challenge, the government is taking steps to build the capacity to 14 GW by 2035 by inviting companies like Microsoft, Amazon, Google and Meta to invest. Microsoft is proposing to invest $17.5 billion and Amazon $35 billion in AI-driven projects across India. Google has proposed to invest $15 billion in data centres. Thus an amount of $67.5 billion will be spent over the next five years. Further, Meta will set up a manufacturing base in collaboration with the largest two Indian groups.
Currently, 90 per cent of data centre capacity is located in Mumbai, Hyderabad, Chennai, Bengaluru and Pune due to availability of power and skilled technical personnel. The fastest growing area is in Hyderabad where data parks are connected to multiple energy sources and power is available at less than 50 per cent of the electricity cost in America. A new tax policy for data centres, both direct and indirect, is on the anvil which is necessary as the value of the digital economy is expected to grow to 20 per cent of GDP by March 2030.
Question: With the large population growth, India needs to generate jobs in the tourism and hospitality sectors. Are there prospects for more hotels being put in place in the next five years? My friends and I are interested in setting up a budget three star hotel.
ANSWER: Every hotel chain in India, both domestic and international, is gearing up to add additional properties because they believe that the hospitality industry in India is just getting started. Apart from the fact that the GDP growth rate is estimated to be around 7 per cent as projected by the International Monetary Fund, the main strength of India lies in the fact that the middle class will grow by an additional 400 million people in the next 15 years. The number of additional airports coming up will also give a boost, which will be supplemented by additional aircraft being acquired by airlines in India.
Most international chains are contemplating setting up new hotels with or without Indian partners. If you decide to set up a 3-star hotel, the capital expenditure, excluding the cost of land, is allowed as a deduction from the taxable profits under section 46 of the Income Tax Act, 2025. Pre-operative expenses which are capitalised in the books of account will be allowed as deduction in the financial year in which the business of running the hotel commences. Several State Governments are also giving fiscal concessions to boost the tourism sector as it generates job opportunities and employment for hospitality professionals.
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