India Revises Tax Rules to Boost Electronics Manufacturing
India’s government has given Apple a major advantage by allowing foreign companies to provide machinery to contract manufacturers without tax liability for five years. This decision was announced as part of Finance Minister Nirmala Sitharaman’s 2026-27 budget, aiming to promote electronics manufacturing in India.
Previously, Apple feared that funding machines for its contract manufacturers, such as Foxconn and Tata, could trigger taxes on iPhone profits in India. Now, foreign ownership of high-end iPhone machinery will not create a taxable “business connection.”
Apple’s Growing Presence in India
Apple has been expanding in India as it diversifies production beyond China. Research from Counterpoint shows that iPhone’s share of the Indian market doubled to 8% since 2022, while India’s share of global iPhone production quadrupled to 25%.
As a result, the new exemption reduces upfront costs for contract manufacturers. It may encourage Apple and other electronics companies to invest more aggressively in India.
Details of the Tax Exemption
Revenue Secretary Arvind Shrivastava explained: “If a foreign company provides machines or equipment to a local manufacturer, the resulting income will be tax-exempt for five years.”
The rule applies until the 2030-31 tax year and covers factories in customs-bonded areas, which are considered outside India’s customs border. Devices sold domestically from these facilities will still attract import duties. Therefore, the exemption is most attractive for export-focused production.
Implications for Electronics Manufacturing
The move is expected to:
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Accelerate electronics production
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Provide certainty for foreign investors
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Strengthen India’s role in global supply chains
Tax expert Shankey Agrawal of BMR Legal said:
“This exemption removes a major risk for electronics manufacturing in India. It encourages faster investment and instills confidence for global companies like Apple.”
Unlike Apple, Samsung’s Indian operations are largely in its own factories, so previous rules had minimal effect on its production. This exemption supports Prime Minister Narendra Modi’s goal of making electronics manufacturing a key driver of economic growth.
