The Government of India has enacted a significant tax exemption that could positively influence operations of foreign technology giants engaged in contract manufacturing within the country. Under the amendment unveiled during the 2026-27 fiscal budget by Finance Minister Nirmala Sitharaman, foreign firms will no longer incur tax liabilities connected to the ownership of machinery provisioned to their contract manufacturers, provided these are situated within specified customs-bonded zones.
These designated areas, effectively operating outside India's customs jurisdiction, now permit foreign entities to supply capital equipment, tooling, and machinery to their Indian contract manufacturers without the associated income being subject to taxation. This exemption is set to persist until the conclusion of the 2030-31 fiscal year, offering a five-year horizon of tax relief designed to mitigate initial investment costs for such machinery.
This regulatory shift addresses a critical concern expressed by companies such as Apple Inc. (NASDAQ:AAPL). Apple had lobbied for amendment to prior tax statutes that could treat the delivery of manufacturing equipment as establishing a taxable "business connection" within India, thereby imposing indirect tax burdens on the profits of manufactured products like the iPhone. The existing framework compelled contract manufacturers—including recognized names like Foxconn Technology Group and Tata—to independently shoulder substantial expenditures to acquire high-cost manufacturing devices.
By negating income tax liabilities on income derived from supplying machinery in these bonding zones, the Indian government reduces one significant financial obstacle. This could pave the way for increased investment flows from Apple and comparable multinational corporations into the Indian electronics manufacturing ecosystem, encouraging them to entrust their contract manufacturers with costly equipment without added tax consequences.
Apple's expanding engagement in India aligns with this policy evolution. The company has observed "strong double-digit revenue growth" in the nation, with CEO Tim Cook characterizing the latest quarter as "terrific" for Apple’s operations there. Cook highlighted the nascent stage of market penetration by noting that the majority of recent purchasers of Apple's flagship products—including iPhones, Macs, iPads, and Apple Watches—are first-time users, emphasizing the substantial prospective market opportunity.
Enhancing its localized supply chain, Apple has reportedly engaged Indian semiconductor firms to collaborate on assembly and packaging of iPhone components. This vertical integration signals Apple's commitment to deepening manufacturing capabilities within India, capitalizing on the country's infrastructural and policy support advances.
Financial results for the first quarter further underline Apple's robust global performance, with revenues reaching $143.76 billion, exceeding analyst expectations of $138.42 billion. The active installed base surpassed 2.5 billion devices, indicating sustained product engagement across regions.
Market analyses complement these operational successes; Benzinga's Edge Rankings place Apple in the 95th percentile for quality and the 71st percentile for momentum, benchmarks that reflect the company’s relative strength amid peers. Over the prior twelve months, Apple’s share price advanced approximately 9.21%, closing recent trading at $259.48, evidencing steady investor confidence.
This tax exemption initiative can be interpreted as a strategic effort by India to solidify its role as a competitive destination for electronics manufacturing investments. By easing foreign firms’ equipment-related fiscal burdens, the government enhances the attractiveness of manufacturing partnerships within the country, fostering an ecosystem potentially capable of supporting emerging technology demands.
Nevertheless, the exemption is geographically constrained to customs-bonded areas, limiting its scope to selected industrial zones. The long-term impact on overall manufacturing growth will depend on companies’ capacity and willingness to operate within these designated regions.
Similarly, the duration of the policy through the fiscal year 2030-31 offers a clear temporal framework for strategic planning but also introduces uncertainty beyond that horizon. Firms must consider the future of tax policies when evaluating capital commitments involving machinery and tooling.
In sum, this policy adjustment facilitates a critical financial facilitation for foreign entities supplying high-cost manufacturing equipment in India, particularly benefitting multinationals like Apple and its contract assembly partners. It underscores India's intent to nurture a favorable manufacturing climate amid intensifying global supply chain realignments.