Overview
- Finance Minister Nirmala Sitharaman’s 2026–27 budget exempts income from providing capital goods, equipment or tooling to Indian contract manufacturers, effective through the 2030–31 tax year.
- The relief applies only to customs-bonded factories treated as outside India’s customs border, and devices sold domestically from those sites would attract import duties.
- The change eliminates the risk that foreign-owned machinery creates a taxable business connection, allowing companies to supply equipment without income-tax liability on that arrangement.
- Apple lobbied for the tweak as it expands iPhone production, after Foxconn and Tata had been purchasing machines themselves at multibillion-dollar cost due to prior tax concerns.
- The budget signals a shift toward deeper local component capacity, with no renewal of smartphone PLI incentives and a reported INR 40,000 crore allocation for electronics components.