India Revises Tax Rules to Boost Electronics Manufacturing
India’s government granted Apple a major advantage by allowing foreign companies to provide machinery to local contract manufacturers without tax liability for five years. This change was announced in Finance Minister Nirmala Sitharaman’s 2026-27 budget to promote electronics manufacturing.
Previously, Apple feared that paying for machines at contract manufacturers like Foxconn and Tata could create a taxable “business connection” under Indian law. The new rules eliminate that risk.
Apple’s Growing Presence in India
Apple has been expanding its operations in India to reduce dependence on China. Counterpoint Research shows that iPhone’s share of the Indian market doubled to 8% since 2022, while India’s share of global iPhone production rose to 25%.
As a result, the exemption reduces upfront costs for local manufacturers. It may encourage Apple and other companies to invest faster in Indian production.
Key Details of the Tax Exemption
Revenue Secretary Arvind Shrivastava said that if a foreign company provides machines or equipment to a local manufacturer, the income from such arrangements will be tax-exempt for five years.
The exemption applies until the 2030-31 tax year. It only covers factories in customs-bonded areas, which are considered outside India’s customs border. Products sold domestically from these factories will still pay import taxes, making the exemption most beneficial for exports.
Impact on Electronics Manufacturing
The measure is expected to:
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Speed up electronics production
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Provide certainty to 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. It encourages faster investment and boosts confidence for companies like Apple.”
Unlike Apple, Samsung produces most phones in its own Indian factories, so the previous rules had little effect on its operations. Overall, this change aligns with Prime Minister Modi’s vision to make electronics manufacturing a key driver of India’s economic growth.
