India’s finance minister presented the union budget for financial year (FY) 2026-27 on February 1, 2026, outlining a series of measures aimed at strengthening the communications, electronics, IT and artificial intelligence (AI) ecosystem.
For the telecom sector, the government has proposed raising the overall outlay to Rs 739.90 billion, along with a sharp increase in support for Bharat Sanchar Nigam Limited (BSNL) following higher capital infusion. The state-run operator is set to receive Rs 284.73 billion in FY 2026-27, up from Rs 68.85 billion in FY 2025-26. The enhanced allocation is meant to fund multiple initiatives and internal requirements, including BharatNet, capital expenditure such as spectrum costs, network expansion and operating expenses.
On digital infrastructure, the minister of electronics and IT highlighted the increasing importance of data centres, particularly AI-focused facilities, within the broader AI ecosystem. He noted that investments of about $70 billion are already under way, with a further $90 billion announced. The budget has proposed a tax holiday until 2047 for foreign companies that deliver cloud services to global clients using data centre infrastructure in India, while serving Indian customers through an Indian reseller entity. It has also proposed a 15 per cent safe harbour on cost where the Indian data centre service provider is a related entity.
The budget also unveiled India Semiconductor Mission 2.0, with an emphasis on building domestic capabilities across semiconductor equipment, materials, design ecosystem development and talent creation. An allocation of Rs 10 billion has been provided for FY 2026-27.
In electronics, the allocation for the Electronics Components Manufacturing Scheme has been proposed to rise to Rs 400 billion from around Rs 220 billion, backed by strong industry response that has reportedly exceeded initial projections.
For IT and IT-enabled services, the budget proposes new safe harbour provisions with higher thresholds and more competitive margins. It also groups software development, IT-enabled services, KPO and contract research and development (R&D) under a single category of Information Technology Services, with a uniform safe harbour margin of 15.5 per cent. The eligibility threshold for safe harbour is proposed to increase from Rs 3 billion to Rs 20 billion, supported by an automated, rule-based approval mechanism. The Budget further proposes fast-tracking the unilateral APA process for IT services and extending modified returns to associated entities entering into APAs.
Separately, the government has announced a manufacturing-related measure benefiting Apple by allowing foreign companies to supply machinery to contract manufacturers in designated customs-bonded areas for five years without triggering tax exposure, a provision applicable until the 2030-31 tax year. Devices sold within India from these facilities would still attract import duties, positioning such zones largely for export-oriented manufacturing.
Industry responses also drew attention to the push for data centres. The founder and chairman of Bharti Enterprises said the budget’s focus on infrastructure and logistics, combined with an emphasis on energy efficiency and support for the data centre ecosystem, should strengthen confidence in India’s digital economy. He also reiterated commitments to technology-driven growth, inclusion and education through the Bharti Airtel Foundation.
