India’s Data Centre Growth Fueled by New Tax Bill, Says Nasscom

The Taxation and Other Laws (Amendment) Bill, 2026, recently tabled in Parliament, is set to significantly enhance India’s data centre sector. This legislative move is expected to attract more global investment, according to Nasscom.

Nasscom states that the bill streamlines the tax exemption framework for data centres by removing the previous approval process. This shift is anticipated to improve tax certainty for foreign companies and ease compliance requirements for cloud service providers.

Streamlining Data Centre Regulations

The new bill specifically targets a reduction in the regulatory burden currently faced by Indian data centres. Nasscom has consistently advocated for a condition-based tax regime rather than one reliant on approvals.

The framework for tax benefits has also been expanded to cover leased data centres operated by Indian companies. This change simplifies tax regulations for foreign entities utilizing these services, fostering easier access to the Indian market.

Key Reforms in the Bill

• The bill removes the “zero-merchant discount rate (MDR)” provision for UPI and RuPay debit card transactions.
• It empowers the government to selectively reintroduce MDR on certain electronic payment methods.
• This aims to establish a sustainable funding and revenue model for the digital payment infrastructure.

Broader Economic Impacts

Beyond data centres, the legislation introduces substantial reforms across India’s digital payments and corporate tax systems. These changes are designed to modernize various facets of the nation’s economic landscape.

Long-term tax relief is also provided for the electronics supply chain, extending tax holidays for foreign suppliers of capital goods to domestic electronics contract manufacturers until the financial year 2040-41.

Corporate Tax Adjustments

The bill maintains the dividend tax exemption for unit holders of business trusts, including Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), under specified conditions. However, corporate tax regimes see some adjustments.

• The new corporate tax regime sets a higher surcharge of 25% for Special Purpose Vehicles (SPVs).
• Other standard domestic companies will continue to have a 10% surcharge.

These varied amendments reflect a comprehensive approach to taxation, aiming to foster growth in critical sectors while ensuring financial sustainability for digital infrastructure and adjusting corporate tax liabilities.