On Sunday, India’s government gave a key win to Apple (AAPL) by allowing foreign companies to provide machines to their contract manufacturers in certain areas for five years without tax risk.
The decision was part of Indian Finance Minister Nirmala Sitharaman’s 2026-27 annual budget, presented on Sunday.
“In order to promote manufacturing of electronic goods by a contract manufacturer and provide certainty on taxation of supply of capital equipment by a foreign company to such manufacturer, it is proposed to amend the Schedule IV to provide exemption to a foreign company for a period upto the tax year 2030-2031, on any income arising on account of providing capital goods, equipment or tooling to a contract manufacturer, being a company resident in India, who is located in a custom bonded area (warehouse referred to in section 65 of the Customs Act, 1962) and produces electronic goods on behalf of such foreign company for a consideration,” said the government in a buget document.
The rule change will apply until the 2030-31 tax year and only to facilities set up in ‘customs-bonded’ areas. These are technically considered as being outside India’s customs border. If devices are sold within India from such facilities, they will attract import taxes, making such factories attractive only for exports.
Apple had been lobbying the Indian government to revise its income tax laws to ensure the company is not taxed for ownership of the high-end iPhone machinery it provides to its contract manufacturers, Reuters reported.
In India, unlike in China, Apple was worried that if it paid for machines for its contract manufacturers, Indian law could consider it as a “business connection” and levy taxes on its iPhone sales profits. That had forced its contract manufacturers, Foxconn Technology (FXCOF) — which is formally known as Hon Hai Precision (HNHAF) (HNHPF) — and Tata to themselves spend billions of dollars on machines, the report noted.
The move could prompt Apple and other companies to invest swiftly in the electronics manufacturing space by taking over initial expenses for pricey machines, cutting the initial cost burden on contract manufacturers they collaborate with, according to the report.
Apple did not immediately respond to a request for comment from Seeking Alpha.
“We are saying that if you bring your machine, and that machine is used by a local manufacturer to produce something, we will … exempt you for five years. We are giving them certainty,” said Revenue Secretary Arvind Shrivastava at a post-budget press conference, the report added.
Apple held several discussions with Indian officials in recent months to revise the law, as it feared the legislation could hamper its future growth, Reuters had reported previously.