Apple lobbies India to revise tax law hindering iPhone manufacturing expansion

Apple is lobbying the Indian government to amend a decades-old income tax law that could subject the company to heavy taxation on the high-end iPhone manufacturing equipment it provides to its contract manufacturers. The move, reportedly is critical for Apple’s long-term manufacturing expansion in India, which has emerged as a key production hub in its global diversification away from China.

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According to a Reuters report, Apple has been in talks with Indian officials in recent months to ensure that its ownership of sophisticated assembly machinery is not treated as a “business connection” under India’s Income Tax Act of 1961- a classification that would make the U.S. company’s profits from iPhone sales taxable in India.

Under Apple’s long-standing business model in China, the company procures expensive machines used for assembling iPhones and provides them to contract manufacturers like Foxconn, while retaining ownership. This arrangement has allowed Apple to maintain control over its manufacturing process without triggering local tax liabilities.

However, under Indian tax law, such an arrangement would be treated differently. If Apple owns the machines used by its Indian partners, that ownership could be deemed a business presence in India, attracting local taxes.

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Without a change in the law, Apple could face billions of dollars in additional taxes if it continues with its existing manufacturing structure. Apple’s appeal comes as the company rapidly scales up its Indian operations.

According to Counterpoint Research, iPhone’s share of the Indian smartphone market has doubled to 8% since 2022, while India’s share of global iPhone shipments has quadrupled to 25%. China, however, still accounts for around 75% of total production.

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India, now the world’s second-largest mobile market, is central to Apple’s diversification strategy. Contract manufacturers like Foxconn and Tata Electronics have collectively invested over $5 billion in setting up five large-scale facilities across the country. These plants rely heavily on high-value machinery that Apple typically owns and supplies—a practice that may trigger the contested tax provisions.