Union Finance Minister Nirmala Sitharaman on Wednesday told the Lok Sabha that tax breaks offered to data centers are subject to “structural conditions” to ensure domestic value creation. She said investments worth $70 billion in data centers are already underway as India’s cloud capacity is expected to grow by about five times by 2030.
Sitharaman refuted Congress member Amar Singh’s charge that the government is giving tax breaks to big finance and technology companies without the condition of employment, localization and technology transfer: “Budget 2026-27 has designed its tax breaks with structural conditions and complementary skill development initiatives to ensure local value creation.” The Budget on February 1 announced a tax holiday until 2047 for any foreign company providing cloud services to customers globally using data center services from India.
Responding to the discussion on the Finance Bill, 2026 in the Lok Sabha on Wednesday, the Finance Minister said that tax exemption till 2047 is available only when a foreign cloud provider uses India-based data center services with physical infrastructure. This ensures that operations, maintenance and jobs remain largely local. It also said that all sales to Indian users should be routed through an Indian reseller entity, creating an entire ecosystem of Indian system integrators, managed service providers and telecom partners who capture value and hire locally.
Even the Safe Harbor Rule (SHR) in the Finance Bill ensures genuine Indian operations, she added. It said the safe harbor margin on cost for resident Indian entities providing data center services to relevant foreign companies ensures that Indian operations are not “hollow shells” but generate meaningful profits and build real technical capacity. The 2026-27 budget proposed a safe margin of 15.5% for IT services.
“So, this ensures that Indian entities get adequate compensation for the real work done by local professionals,” the FM said, adding that $70 billion worth of investments in data centers are “already underway” and that cloud capacity in India is “expected to grow 4X or perhaps 5X by 2030.” The sheer scale of construction, cooling infrastructure, energy management, cybersecurity and demand for network operations will generate thousands of direct and indirect jobs in India, she added.
Sitharaman told the House that “nation-building is a continuous process and does not happen overnight” as each money bill is a step towards the ultimate goal of achieving ‘Vikasit Bharat’ by 2047 and fulfilling the aspirations of 140 crore Indian citizens. After discussions, the Lok Sabha passed the Finance Bill 2026.
Speaking in the Council, the Foreign Minister said that in this quarter of the 21st century, India is moving forward with reforms not as compulsion but out of conviction, with clear commitment and confidence. She added: “India is counting on rapid reform under the leadership of the Honorable Prime Minister Shri Narendra Modi, and this Finance Bill for 2026-27 is based on five clear principles.”
The first is trust-based tax administration, the second is ease of living for common citizens, the third is empowerment of MSMEs, farmers and cooperatives, the fourth is to make India a stronger global trade hub and the fifth is to provide seamless trade facilities through customs reforms, she said.
Responding to Opposition criticism that the Finance Bill does not offer anything for the middle class, Sitharaman said the member was on a “wrong track” and gave examples of how the FY27 Budget reduced the high TCS (tax collected at source) rates for pursuing education under the Liberal Remittance Scheme (LRS) from 5% to 2%, and foreign group tour packages from 20% to 2%. Moreover, the government has eliminated customs duties on 17 critical life-saving medicines.
On ease of compliance, especially for MSMEs, she said the government’s approach is to facilitate first, implement later, “if necessary”. She said that with the increased use of technology, the government has provided more facilitative transactions to individual taxpayers and small and medium-sized enterprises.
Refuting the opposition’s accusations that privileges and additional fees remain outside the divisible pool, the Minister of Finance said that this is stipulated in the Constitution, just as states are allowed to impose taxes on some items that have nothing to do with the divisible pool. She added: “We are using a clause that is legally provided. We are allowed to do this, and we are doing something legitimate.”
However, she explained that the Union government is spending excess funds on developmental works in the states by providing facilities such as hospitals, schools and paving roads. She added that resources from many transfers are 100% transferred to the states. In the past six-year period, 2019-20 to 2024-25, cumulative utilization of outages exceeded collection. while $The Center sent that Rs 15.14 lakh crore was collected during this period $Rs 15.97 lakh crore to states under various schemes, the Finance Minister said.
Sitharaman refuted Trinamool Congress (TMC) leader Sujata Rai’s statement that “only increasing capital expenditure without ensuring distributive justice is unfair”.
“If distributive justice is really the concern of the TMC, I would ask them why they are acting vindictive and making the poorest of the poor suffer,” the Finance Minister said, referring to the Pradhan Mantri Cha Shramik Protsahan Yojana.
More than 7,000 tea workers from 800 tea gardens in 18 districts of Assam have benefited from the same scheme, Sitharaman said. Referring to the West Bengal government, she said in Bengali while referring to the 3.79 lakh workers in the tea gardens in the state: “Chai cha bajaner shrumkar saathi unai kurichi (There was injustice with 3.79 lakh workers in the tea gardens).”
“PM KISAN, which is given to all small farmers, has been banned for two years in Bengal. Distributive justice? Ayushman Bharat has been banned for 1.5 crore Bengali families. Maybe they were working elsewhere. They could not get the benefit of Ayushman Bharat because you deprived them of health. Now is this distributive justice? You are beating the poorest of the poor and lecturing us?” “Their distributive justice has one candidate – are they TMC cardholders or party members? Then they will give them everything. Chai Bagan workers are not TMC members, so they will not get it. They are talking about distributive justice,” Sitharaman said. “I’m ashamed to hear that.”
Congress leader Manish Tiwari, who participated in the discussion, said that the budget announced on February 1 was based on certain assumptions. “These assumptions no longer exist,” he said, referring to the war in West Asia that broke out on February 28. He asked the Finance Minister – “How much will the war be… on the Indian economy” and asked her to explain in detail how the war would affect the prices of essential items such as fuel and food after the parliamentary elections are over.
Congress leader Deepinder Singh Hooda pointed to the weakness of the Indian currency and the high prices of petrol, diesel and urea, and said that the country’s economy is in a dangerous situation. Saying that the rupee is currently the “fastest falling currency in the world” compared to the Congress-led UPA regime (2004-14), when the rupee was at 60 to the dollar despite international crude oil rising to $147 a barrel. Sure enough, the rupee hit a record low of 93.94 against the US dollar on Monday. The price of Brent crude oil, which settled at $112.19 a barrel on Friday, hovered above $100.
