Union finance minister Nirmala Sitharaman on Wednesday told the Lok Sabha that tax holidays offered to datacenters are with “structural conditionalities” to ensure domestic value creation and said investments worth $70 billion in datacenter is already underway as India’s cloud capacity projected to grow by approximately five times by 2030.
Refuting the charge of Congress MP Amar Singh that the government is giving tax exemptions to big finance and tech firms without the condition of employment, localisation, and technology transfer, Sitharaman said: “The 2026-27 Budget has designed its tax holidays with structural conditionalities and complementary skilling initiatives to ensure domestic value creation happens.” The Budget on February 1 announced tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India.
Replying to the debate on the Finance Bill, 2026 in the Lok Sabha on Wednesday, the finance minister said the tax holiday till 2047 is available only when the foreign cloud provider utilises datacenter services located in India with physical infrastructure. This guarantees that operation, maintenance and jobs largely stay local. And also, all sales to Indian users must be routed through an Indian reseller entity, creating an entire ecosystem of Indian systems integrators, manage service providers and telecom partners who capture value and employment locally, she said.
Even the Safe Harbour Rule (SHR) in the Finance Bill ensures genuine Indian operations, she added. The safe harbour margin on cost for resident Indian entities providing datacenter services to related foreign companies ensures that Indian operations are not “hollow shells” but making meaningful profits and building genuine technical capability, she said. The Budget 2026-27 proposed a 15.5% safe harbour margin for IT services.
“So, this guarantees Indian entities are adequately compensated for real work performed by local professionals,” FM said, adding that $70 billion investments in datacenter are “already underway” and India’s cloud capacity “projected to grow 4X or probably 5X by 2030”, she said. The sheer volume of construction, cooling infrastructure, power management, cyber security and network operations demand will generate lakhs of direct and indirect jobs in India, she added.
Sitharaman told the House that “nation building is a continuous process and it doesn’t happen overnight” as every finance bill is a step towards the ultimate goal of attaining “Vikasit Bharat” by 2047 and fulfilling the aspirations of 140 crore Indian citizens. After discussions, the Lok Sabha passed the Finance Bill, 2026.
Speaking in the House, FM said in this quarter of 21st century, India is moving forward with reforms not as a compulsion but out of conviction, with clarity commitment and confidence. “India is riding on the reform express under the leadership of Hon’ble Prime Minister Shri Narendra Modi, and this Finance Bill of 2026-27, rests on five clear principles,” she added.
First one is trust-based tax administration, second is the ease of living for common citizens, third is empowering the micro, small and medium enterprises (MSMEs), farmers and cooperatives, fourth is making India a stronger global business hub, and the fifth one is to bring seamless trade facilitations with customs reforms, she said.
Replying to a criticism by the Opposition that the finance bill has nothing for the middle class, Sitharaman said, the member was on a “wrong track” and gave examples how the budget for FY27 has slashed the high TCS (tax collected at source) rates for pursuing education under the Liberalised Remittance Scheme (LRS) from 5% to 2%, and overseas group tour packages from 20% to 2%. Besides, the government removed customs duties on 17 critical life-saving medicines.
On ease of compliance, particularly for MSMEs, she said the government’s approach is facilitate first, enforcing later, “if necessary”. With the increased use of technology, the government has given more facilitative treatments to individual taxpayers and MSMEs, she said.
Refuting the Opposition charge that cesses and surcharges are kept outside the divisible pool, the finance minister said, this is provided by the constitution just like it allows states to levy taxes on certain items which has nothing to do with divisible pool. “We are using a provision that is legitimately provided. We are allowed to do it, and we are doing a legitimate thing,” she added.
She, however, explained that the Union government spend cess money on developmental works in states by providing facilities such as hospitals, schools, and laying of roads. Resources from many cesses are 100% transferred to states, she added. In the last six-year period, 2019-20 to 2024-25, the cumulative utilization of cesses has exceeded the collection. While ₹15.14 lakh crore was collected during the period, the centre sent ₹15.97 lakh crore to states under various schemes, the finance minister said.
Sitharaman rebutted Trinamool Congress (TMC) leader Sougata Ray’s remarks that “only increasing capital expenditure without ensuring distributive justice is unfair.”
“If distributive justice is really the concern of the TMC, I would like to ask them as to why are they acting in vengeance and making the poorest of the poor suffer,” the finance minister said referring to the Pradhan Mantri Cha Shramik Protsahan Yojana, which was introduced in 2021-22 for the welfare of the poor tea garden workers.
Saying that over 7 lakh tea workers from 800 tea gardens across 18 districts of Assam benefited from the same scheme, Sitharaman said. Taking a dig at the West Bengal government while referring to the state’s 3.79 lakh tea garden workers, she said in Bangla: “Chai Chaa Bagaaner Shromiker Sathey Onnay Korechey (There has been injustice with 3.79 lakh tea garden workers).”
“PM KISAN, which is given for all the small farmers, was blocked for two years in Bengal. Distributive justice? Ayushman Bharat was blocked for 1.5 crore Bengali families. They may be even working somewhere else. They couldn’t get the benefit of Ayushman Bharat because you denied health for them. Now is that distributive justice? You are hitting at the poorest of the poor and giving lectures to us?,” she asked. “Their distributive justice has one filter – Are they TMC’s card holders or party members? Then they’ll give everything to them. Chai Bagaan workers aren’t TMC members, so they won’t get it. They are talking about distributive justice? I’m ashamed to hear it,” Sitharaman said.
Participating in the debate, Congress leader Manish Tewari said the budget that was announced on February 1 was based on certain assumptions. “Those assumptions do not exist anymore,” he said referring to the war in West Asia that broke out on February 28. He enquired the finance minister — “how much would be the burden of the war… on the Indian economy” and asked her to explain in detail, how the war will impact prices of essential items such as fuels and food items after assembly polls will be over.
Congress leader Deepender Singh Hooda pointed at weak Indian currency and high prices of petrol, diesel and urea, and said the country’s economy is in a serious situation. Saying that the rupee is currently the “world’s fastest falling currency” as compared to the Congress-led UPA regime (2004-14), when the rupee was at 60 against the dollar despite international crude oil had surged to $147 a barrel. To be sure, the rupee hit a record low of 93.94 against the US dollar on Monday. Benchmark brent crude that settled at $112.19 a barrel on Friday, has been hovering above $100.
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