Budget 2026 gives Apple a major tax win, clears path for faster iPhone manufacturing scale-up in India

India’s government has handed a significant boost to Apple’s manufacturing ambitions by amending income tax rules to allow foreign companies to provide machinery to their contract manufacturers without triggering tax liabilities for a period of five years.

The change, announced as part of Finance Minister Nirmala Sitharaman’s Union Budget for 2026–27, addresses a long-standing concern raised by Apple over potential taxation linked to its ownership of high-value iPhone manufacturing equipment in India.

Under earlier rules, Apple feared that paying for and owning machinery used by its Indian contract manufacturers could be interpreted as establishing a “business connection” in the country, exposing the company to taxes on profits from iPhone sales. This risk had forced partners such as Foxconn and Tata to independently invest billions of dollars in production equipment.

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The revised policy clarifies that mere ownership of capital goods or tooling by a foreign company will not attract tax, provided the equipment is used by an Indian contract manufacturer. The exemption will apply for five years, until the 2030–31 tax year, and will be limited to factories operating in customs-bonded zones that are primarily export-oriented.

Revenue Secretary Arvind Shrivastava said the move was aimed at providing predictability and encouraging global electronics firms to deepen their manufacturing footprint in India. He said the government wanted to ensure that foreign companies supplying machinery to local manufacturers were not penalised under tax laws.

Industry experts say the decision removes a key structural hurdle for electronics manufacturing in India. Tax specialists note that the exemption significantly reduces upfront risk for companies like Apple, making it easier for them to directly fund expensive machinery and accelerate production scale-up.

Apple’s presence in India has expanded rapidly as the company seeks to diversify its supply chain beyond China. According to Counterpoint Research, Apple’s share of India’s smartphone market has doubled to 8 percent since 2022, while India’s share of global iPhone shipments has grown sharply over the same period.

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The rule change is expected to strengthen India’s appeal as an export manufacturing hub, especially for high-end electronics. However, devices sold domestically from bonded factories will still attract import duties, reinforcing the export-focused nature of such facilities.

While Apple has not commented publicly on the development, analysts say the policy shift could encourage not only Apple but also other global electronics firms to commit fresh investments by easing cost pressures on their contract manufacturing partners.