India Changes Tax Rules to Boost Electronics Manufacturing
India’s government has given Apple a major advantage by allowing foreign companies to provide machines to contract manufacturers without facing 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 funding machines for contract manufacturers like Foxconn and Tata could trigger taxes on its iPhone profits. The new rules ensure that owning machinery does not create a taxable business connection in India.
Apple Expands in India
Apple has grown its presence in India while diversifying production beyond China. Research by Counterpoint shows that iPhone’s share of the Indian market doubled to 8% since 2022. Additionally, India’s share of global iPhone production quadrupled to 25% during the same period.
The exemption lowers upfront costs for manufacturers. Therefore, Apple and other electronics firms may invest more rapidly in Indian production.
Key Details of the Exemption
Revenue Secretary Arvind Shrivastava explained that if a foreign company provides machines or equipment to a local manufacturer, the resulting income will be exempt from taxes 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. However, devices sold domestically from these factories will still attract import duties, making them primarily useful for export production.
Impact on Electronics Manufacturing
The new measure is expected to:
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Accelerate 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 for electronics manufacturing. It encourages faster investment and builds confidence for global companies like Apple.”
Unlike Apple, Samsung manufactures mostly in its own factories in India, so prior rules did not affect it. The exemption supports Prime Minister Modi’s goal of using electronics manufacturing as a key driver of economic growth.
