India hands Apple a major boost by easing tax risks for foreign-funded manufacturing equipment

India has given Apple a significant policy win, clearing the way for foreign companies to fund manufacturing equipment in the country without triggering tax liabilities — a move that could accelerate the expansion of electronics production in India.
Under changes announced Sunday as part of Finance Minister Nirmala Sitharaman’s 2026–27 budget, foreign firms will be allowed to supply machinery to their Indian contract manufacturers for up to five years without facing income tax exposure. The exemption applies to factories located in customs bonded zones and will remain in force through the 2030–31 tax year.
For Apple, the change removes a long-standing obstacle as it shifts more iPhone production away from China. The company has steadily expanded in India, where iPhones now account for 8% of the local smartphone market — double their share in 2022. While China still dominates Apple’s global manufacturing footprint, India’s share of iPhone production has jumped from about 6% to roughly 25% over the same period, according to Counterpoint Research.
Until now, Apple faced a unique challenge in India. Unlike in China, Indian tax law risked treating Apple’s ownership of high-end manufacturing equipment as a “business connection,” potentially exposing the company to taxes on iPhone sales profits. To avoid that risk, Apple’s contract manufacturers — including Foxconn and Tata — had been forced to shoulder billions of dollars in upfront equipment costs themselves.
The government’s new clarification directly addresses that concern. Officials said that merely owning machinery used by an Indian contract manufacturer will no longer be grounds for taxing the foreign company.
“To promote manufacturing of electronic goods for a contract manufacturer, we are giving certainty,” Revenue Secretary Arvind Shrivastava said at a post-budget press briefing, noting the five-year exemption window.
The policy could significantly lower barriers to entry for global electronics firms by allowing them to finance expensive machinery directly, rather than pushing those costs onto local partners. That, in turn, may speed up factory build-outs and production scale-ups.
“This exemption removes a key deal-breaking risk for electronics manufacturing in India,” said Shankey Agrawal, a partner at tax-focused law firm BMR Legal. “The result is faster scale-up and greater confidence for global electronics players.”
Smartphone manufacturing is a central pillar of Prime Minister Narendra Modi’s economic strategy, but the exemption comes with limits. It applies only to customs-bonded areas, which are technically outside India’s customs borders. Devices sold domestically from these facilities would still face import duties, making them primarily attractive for export-focused production.
Apple did not immediately comment on the announcement. The company has held extensive discussions with Indian officials in recent months, Reuters has reported, as it sought clarity on rules that could have constrained its long-term growth plans in the country.
Notably, the earlier tax framework did not affect Samsung, Apple’s biggest smartphone rival, since most Samsung phones sold in India are produced in its own local factories rather than by third-party manufacturers.
For Apple and others betting on India as the next major manufacturing hub, the message from New Delhi is now clearer — and considerably more welcoming.