India Plans Extended Tax Breaks for Apple and Foreign Manufacturers Until 2041

India may soon extend tax breaks for contract manufacturing until 2041, a move that could significantly benefit Apple. The government’s draft amendment to tax laws aims to provide long-term tax certainty for foreign companies supplying machinery to their contract manufacturers in India. This proposal will take effect only if both Houses of Parliament approve it.

Key Highlights

• India plans to extend tax breaks for contract manufacturing until 2041.
• Apple could benefit as it expands iPhone production in India.
• Proposal covers tax exemptions for equipment and component storage income.
• India projected to produce 26 percent of global iPhones by 2026.
• iPhone 16 was the best-selling smartphone in India last year.

Proposed Tax Exemptions

The draft bill proposes to extend tax exemptions for equipment supplied to contract manufacturers. These exemptions apply to companies involved in producing mobile phones, tablets, laptops, hearing devices, and wearable electronics. The government also plans to exempt, until 2041, the income of foreign companies from storing and providing parts used to make these products for contract manufacturers in India.

India first introduced this tax exemption for foreign companies in February 2024, with an initial validity until 2031. Apple had lobbied for these changes, arguing that supplying high-end manufacturing machinery to its Indian contract manufacturers could be considered a "business connection" under Indian tax law. This could have exposed Apple’s iPhone profits to Indian taxation. If the new proposal passes, Apple and other global firms can supply high-end equipment to their contractors without facing additional income tax obligations until 2041.

The proposal may also encourage other international companies to bring advanced machinery to their Indian contractors, further boosting the country’s electronics manufacturing sector.

Impact on Apple and Manufacturing

India has become a key manufacturing hub for Apple as the company diversifies production beyond China. According to Counterpoint Research, India is projected to produce 26 percent of the world’s iPhones in 2026, up from 6 percent four years ago. Apple’s expansion in India has already created around 350,000 direct and indirect jobs.

Apple continues to see growth in the premium smartphone segment in India. Reports indicate that the iPhone 16 was the best-selling smartphone in India last year. The extended tax breaks could further incentivize Apple to increase its manufacturing footprint in the country.

Additional Proposed Amendments

The draft amendments also include tax relief for income earned by foreign companies from storing and supplying components for electronics manufacturing. The bill proposes easier rules for foreign companies using data center services in India. In February, the government announced a tax exemption until 2047 for foreign companies using Indian data centers to serve global clients. This addresses concerns that global income could be taxed for using such facilities. The latest bill allows data centers to be leased, rather than owned, by Indian partners of foreign companies.

Other proposals include a 15-year tax exemption for foreign diamond miners and traders selling rough diamonds through designated trading zones in India. These measures are part of broader efforts to attract foreign investment and strengthen India’s position as a global manufacturing and trading hub.