Government Clears Tax Uncertainty for Apple
India’s central government has given major relief to Apple by easing rules on manufacturing equipment. Foreign companies can now supply machinery to their contract manufacturers without facing tax risks. The government announced this decision on Sunday. It will apply for five years in select manufacturing zones.
Smartphone Manufacturing Remains a Policy Priority
Smartphone manufacturing plays a key role in Prime Minister Narendra Modi’s economic strategy. For months, Apple had urged the government to amend income tax rules. The company wanted clarity on taxes linked to owning high-value iPhone equipment in India.
Apple feared that tax authorities could impose additional levies. These concerns arose simply because Apple owned machinery used by its contract manufacturers.
Earlier Rules Raised Business Connection Concerns
Compared to China, India’s tax framework created uncertainty for Apple. If the company paid for manufacturing machines, authorities could treat this as a “business connection.” As a result, Apple faced the risk of taxes on its iPhone sales profits in India.
Due to this risk, contract manufacturers such as Foxconn and Tata invested billions of dollars themselves in production equipment.
Government Clarifies Tax Position
On Sunday, the government clarified its stance. It stated that simple ownership of machinery by a foreign company will not create income tax liability. Officials said the change aims to strengthen electronics manufacturing through contract production.
The government also made it clear that providing equipment alone will not count as a taxable activity.
Budget Announcement by Finance Minister
Finance Minister Nirmala Sitharaman announced the measure during the Union Budget 2026–27 presentation. The policy forms part of India’s broader push to attract global manufacturing investment.
Policy Valid Until 2030–31
The revised rule will remain effective until the 2030–31 tax year. However, it applies only to factories located in customs-bonded zones. These zones sit outside India’s customs territory.
If companies sell goods domestically from such units, they must pay import duties. Therefore, these facilities mainly suit export-focused manufacturing.
In official budget documents, the government confirmed tax exemptions. Income linked to supplying capital goods, machinery, or tooling to Indian contract manufacturers will qualify for relief.
Industry Experts Welcome the Move
Apple has not yet issued an official response. However, tax experts have welcomed the decision.
According to Shankey Agrawal, partner at BMR Legal, the exemption removes a major obstacle. He said the change will speed up production scale-up. It will also boost confidence among global electronics manufacturers.
Apple Expands Its Footprint in India
The decision comes as Apple reduces its reliance on China. At the same time, it continues to expand operations in India. Research firm Counterpoint Research reports that Apple’s iPhone market share in India has doubled to 8% since 2022.
Globally, China still accounts for about 75% of iPhone shipments. However, India’s share has climbed to 25% over the same period.
According to Reuters, Apple held multiple discussions with Indian officials in recent months. The company feared earlier rules could slow its long-term growth in the country.