Mumbai, February 2: The Indian government has announced a major policy change that allows foreign companies, including Apple, to provide high-end machinery to their local contract manufacturers for five years without incurring additional tax risks. The decision, unveiled during the Union Budget 2026-27, aims to accelerate the scale of electronics manufacturing and exports from the country.

This move addresses a long-standing concern for global technology firms that previously feared such arrangements would create a "business connection" under Indian law. Such a classification could have led to the taxation of global profits on iPhone sales, a risk that had forced contract partners like Foxconn and Tata to bear the multi-billion USD burden of equipment costs themselves. iPhone Fold Rumours: Apple’s First Foldable Smartphone Tipped To Feature Class-Leading Battery Life and 7.8-Inch Crease-Free Display.

Tax Exemption for Electronics Manufacturing

As part of the new fiscal measures, the government confirmed that the mere ownership of machines by a foreign entity will not lead to a tax liability on that entity. This exemption is specifically designed to promote the manufacturing of electronic goods and will remain in effect until the 2030-31 tax year, providing five years of legislative certainty to investors.

Revenue Secretary Arvind Shrivastava clarified that if a foreign company brings its own machinery to be used by a local manufacturer, the resulting income or presence will be exempt from certain tax implications. This policy is expected to prompt Apple and other electronics giants to invest more rapidly by taking over the initial expenses for pricey, specialised equipment.

Focus on Export-Oriented Production

The rule change applies exclusively to factories established within customs-bonded areas, which are technically treated as being outside India’s customs border. While this makes the facilities highly attractive for global exports, any devices sold within the Indian domestic market from these zones will still be subject to standard import taxes. Apple Faces AI Talent Drain as Top Researchers and Siri Executive Move to Meta and Google: Report.

India’s share of global iPhone shipments has quadrupled to 25% since 2022, while its domestic market share has doubled to 8% in the same period. By removing this "deal-breaking" tax risk, India seeks to further diversify supply chains away from China. Unlike rivals such as Samsung, which operates its own factories in India, Apple relies heavily on third-party contractors, making this specific legislative tweak essential for its continued expansion.

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(The above story first appeared on LatestLY on Feb 02, 2026 11:51 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).