India Lifts Tax Barrier for Apple, Foreign Electronics Manufacturers

India delivered a major policy boost to Apple and other foreign electronics makers by easing tax rules that had long complicated investments in local manufacturing, as New Delhi accelerates efforts to position itself as a global production hub.

Under the new policy, announced Sunday as part of India’s federal budget for the 2026/27 fiscal year, foreign companies will be allowed to supply manufacturing equipment to their contract manufacturers in designated zones for up to five years without triggering tax liabilities. 

The move removes a key regulatory risk that had discouraged companies such as Apple from directly investing in high-value production equipment.

The decision comes as Apple expands its footprint in India as part of a broader strategy to diversify its manufacturing base away from China. According to Counterpoint Research, Apple’s share of India’s smartphone market has doubled to 8% since 2022. While China still accounts for roughly 75% of global iPhone shipments, India’s share has quadrupled to 25% over the same period.

For years, Apple had pressed Indian authorities to amend income tax rules to ensure that its ownership of advanced manufacturing equipment supplied to contract partners would not be interpreted as creating a taxable “business connection” in India. Unlike in China, Apple feared that paying for and owning such equipment could expose it to taxes on profits from iPhone sales in the Indian market.

As a result, contract manufacturers such as Foxconn and Tata Group were previously forced to shoulder billions of dollars in equipment costs themselves, adding financial strain and slowing capacity expansion.

“To promote electronics manufacturing through the contract manufacturing model, specific legal amendments will be introduced to ensure that mere ownership of equipment by a foreign company does not result in taxation,” India’s finance ministry said in a budget explanatory note.

Finance Minister Nirmala Sitharaman formally unveiled the measure on Sunday, signaling the government’s intent to offer greater regulatory certainty to multinational firms weighing long-term investments in India.

Arvind Shrivastava, India’s revenue secretary, said during a post-budget briefing that the policy aims to remove ambiguity. “If your company brings in machinery that is used by a local manufacturer to produce goods, we are granting a five-year tax exemption. We are providing certainty,” he said.

The exemption will apply through the 2030/31 fiscal year and is limited to factories established in so-called bonded manufacturing zones, which are technically treated as being outside India’s customs territory. Goods sold domestically from these zones will still be subject to import duties, making them primarily export-oriented facilities.

Legal and industry experts say the change could significantly accelerate investment. “This exemption resolves a risk that could have derailed electronics manufacturing deals in India,” said Shanky Agrawal, a partner at tax-focused law firm BMR Legal. “The outcome will be faster expansion and greater confidence among global companies manufacturing in India.”

The reform supports Prime Minister Narendra Modi’s broader economic agenda, which places smartphone and electronics manufacturing at the center of India’s industrial growth strategy.