India allows foreign firms to fund equipment for contract manufacturers, easing a concern for Apple

India's 2026-27 budget exempts income from foreign ownership of capital equipment provided to contract manufacturers in customs-bonded areas until the 2030-31 tax year, a change announced to promote electronics manufacturing and explained in the budget documents.

India's finance ministry announced a tax rule change in its 2026-27 budget that exempts income from foreign ownership of equipment provided to contract manufacturers in designated areas. The move is described in budget documents as aimed at promoting electronics manufacturing. The change applies only to factories in customs-bonded areas and runs until the 2030-31 tax year. The article mentions that Apple had sought such a clarification because of concerns about being treated as having a taxable business connection in India. Key details: - The change was announced as part of Finance Minister Nirmala Sitharaman's 2026-27 annual budget. - The exemption covers income arising from providing capital goods, equipment or tooling to a contract manufacturer resident in India, according to the budget notes. - It applies only to factories set up in customs-bonded areas, which are treated as outside India's customs border and are primarily used for exports because sales within India would attract import taxes. - The article mentions Apple had been lobbying for a modification to avoid tax exposure from owning high-end machinery in India, and that contract manufacturers Foxconn and Tata had previously borne equipment costs. - The article cites Counterpoint Research saying iPhone market share in India has doubled to 8% since 2022 and that India's share of global iPhone shipments has risen to about 25% since 2022, while China still accounts for about 75%. Summary: The budget change is presented as a step to promote electronics manufacturing by removing a potential tax risk associated with foreign ownership of production equipment in bonded zones, the article says. How companies and contract manufacturers will respond in terms of investment and production plans is undetermined at this time.