New Delhi: In a landmark policy shift announced in the Union Budget 2026–27, the Indian government delivered a strategic win for Apple Inc. and other global electronics manufacturers by revising tax treatment on foreign-funded machinery. The move, designed to strengthen India’s position as a leading electronics manufacturing hub, allows foreign companies to directly finance production equipment for their contract manufacturers in India without triggering adverse tax consequences a change expected to unlock significant investment and accelerate the growth of high-value technology exports.
Prior to this Budget decision, foreign firms faced a regulatory barrier under Indian tax law: when they funded capital equipment used by manufacturers in India, such investment could create a “business connection” a taxable presence under Indian law. This discouraged direct investment in machinery and forced manufacturers to shoulder the cost, slowing the scaling of advanced facilities. By clarifying that foreign-owned manufacturing equipment in customs-bonded zones will not constitute a taxable business link, the Budget removes a key deterrent and significantly improves the investment landscape for electronics production.
The tax exemption, which runs through the 2030–31 financial year, applies specifically to equipment used in bonded facilities where goods are manufactured for export. Products assembled in such zones benefit from export-oriented incentives, while domestically sold units from these facilities continue to attract standard duties. This targeted carve-out is intended to foster an export-focused ecosystem in India strengthening the country’s competitiveness against other manufacturing destinations and enticing global brands to deepen their footprint in India.
Industry analysts say the reform aligns with Prime Minister Narendra Modi’s national strategy of transforming India into a critical hub for global electronics supply chains. Apple, which has been diversifying production beyond China where around **75 percent of iPhones have historically been assembled has already increased India’s share of global iPhone output to nearly 25 percent by 2025 while expanding domestic sales. The new tax clarity now gives multinational companies greater confidence to invest in equipment that supports manufacturing technologies such as precision tooling, automation, and advanced assembly lines.
For Apple and its contract partners such as Foxconn and Tata Electronics, the tax revision could translate into faster capacity expansion and more predictable capital deployment. Previously, uncertainty around tax implications made large-scale equipment financing more complex, often delaying investment decisions or pushing expenditure into less efficient channels. The Budget’s announcement is widely seen as a signal that India is ready to align fiscal policy with industrial objectives, bridging regulatory ambiguity that once hampered growth.
Beyond Apple, the revision is expected to benefit a broad array of high-tech manufacturers, including producers of semiconductors, precision electronics, and critical components for renewable energy systems and advanced machinery. As companies increasingly seek to diversify production amid geopolitical tensions and supply chain reshoring, India’s clarified tax stance anchored in export-oriented bonded zones could attract larger and faster-moving foreign capital flows.
The Budget move complements other government initiatives aimed at strengthening domestic manufacturing, including tariff recalibrations, production-linked incentives (PLIs), and infrastructure support. Taken together, these measures underscore New Delhi’s broader ambition to integrate India more deeply into global production networks, reduce dependence on imports, and harness electronics manufacturing as a key engine of job creation and export growth in the decades ahead.