India extends tax breaks to 2041, cementing Apple's iPhone expansion

India's proposed extension of tax exemptions through 2041 hands Apple a decade of added certainty as it shifts iPhone production beyond China.

India proposed extending tax exemptions until 2041 for foreign companies supplying machinery to contract manufacturers, a policy shift that locks in long-term certainty for Apple as it scales iPhone output in the South Asian market. The draft bill, seen by Reuters, extends the exemption to March 31, 2041, from the current 2031 expiry.

"The proposed tax changes will enable foreign companies to store and transfer critical equipment and components in India for their contract manufacturers, helping mitigate supply chain disruptions arising from trade uncertainties while providing greater tax certainty," said Riaz Thingna, a partner at Grant Thornton Bharat.

India is set to produce 26 percent of the world's iPhones in 2026, up from 6 percent four years ago, according to Counterpoint Research. The exemption covers manufacturers of mobile phones, tablets, laptops, hearing and wearable electronic devices, and must still be passed by both houses of parliament.

The extension removes a key tax risk that Apple flagged when it lobbied New Delhi in October 2025, fearing that ownership of machinery supplied to contract manufacturers could be treated as a "business connection" under Indian tax law, exposing iPhone profits to taxation. With the exemption now running through 2041, Apple's manufacturing diversification strategy gains a regulatory foundation extending well beyond the current decade.

The February 2026 exemption, introduced after Apple's lobbying push, was initially valid only until 2031. The proposed extension to 2041 provides a 15-year runway for foreign companies to supply equipment to contract manufacturers in India without triggering tax liability on that machinery.

The draft bill also exempts foreign companies' income from storing and providing parts used to manufacture electronics components to contract manufacturers until 2041. This applies to factories and warehouses in customs-bonded areas, which are technically outside India's customs border. Devices sold within India from such facilities would attract import taxes, making these zones attractive primarily for export-oriented production.

Data Centers and Diamond Trade

India has separately proposed making it easier for foreign companies using data center services to access tax exemptions. The February 2026 announcement provided a tax exemption until 2047 for foreign companies using Indian data centers to serve global clients. The new bill allows data centers to be leased rather than owned by Indian partners of foreign companies, lowering capital requirements and easing entry for smaller and mid-sized players, Thingna said.

In a separate measure, India proposed a 15-year tax exemption for foreign diamond miners and traders selling rough diamonds through designated trading zones. India is already the world's largest diamond-cutting and polishing center.

The policy package reflects New Delhi's broader push to position India as a manufacturing and services hub as global supply chains diversify away from China. For Apple, the tax certainty comes as the company deepens its Indian footprint — the country's share of global iPhone production has more than quadrupled in four years, and the extension through 2041 aligns with Apple's multi-year manufacturing expansion plans.

The bill must still be passed by both houses of India's parliament. If approved, the exemptions would take effect from the current fiscal year, providing immediate relief to companies already operating under the previous 2031 deadline.

This article is for informational purposes only and does not constitute investment advice.