By Sampurna Majumder
The Union government has aimed to solve a key tax ambiguity faced by Apple and other global electronics companies, a step anticipated to accelerate foreign investment in India’s electronics manufacturing sector. The proposal, which was included in the Union Budget 2026-2027, allows foreign companies to finance and provide manufacturing equipment to Indian contract manufacturers without facing income tax duties for a certain period of time.
As long as production takes place in approved customs-bonded zones, foreign businesses that supply capital goods, machinery, or tooling to Indian manufacturers will be excluded from paying taxes for a maximum of five years. These zones are classified as outside India’s customs authority, allowing duty-free entry of equipment and components, although products sold outside the domestic market will continue to collect import taxes.
Previously, products supplied and owned by the foreign firms were classified as “business connections” under Indian income tax law. This classification may have created legal confusion by exposing them to taxation on profits associated with Indian operations. As a result, companies like Apple became cautious about directly funding or owning high-value machinery used in Indian factories.
The regulatory change is viewed as a victory for the company. Up until now, in order to protect itself from any tax liability, these Indian partners often had to pay for the expensive production equipment. It is expected that the new regulation will lessen that burden and allow Apple and its suppliers to work together more closely.
Revenue Secretary Arvind Shrivastava said the exemption will give global corporations confidence to invest in machinery without fear of retrospective tax demands. The plan aligns with the government’s overall “Make in India” agenda, which aspires to transform India into a global manufacturing hub by drawing high-value output rather than low-margin assembly work. Electronics production, particularly smartphones, has been a main focus of this effort.
India has already become key to Apple’s goals to diversify its supply chain away from China. Industry estimates show that about a quarter of global iPhone shipments are now produced in India, a huge jump over the previous few years. Analysts say the tax clarification could further speed this move.
Apple has not made any public remarks regarding the ruling. Industry watchers, however, interpret the action as a hint that India is becoming more open to modifying its tax system in order to draw in foreign industrial investment.