MeitY Proposes 20-Year Tax Holiday for Data Centres to Boost Investment: Report

The Ministry of Electronics and Information Technology (MeitY) has reportedly proposed a new policy that could offer tax exemptions of up to 20 years for data centre developers. As per the report, the tax break for these projects will only be offered if the developers can meet specified targets on output capacity, power efficiency, and employment generation. MeitY has reportedly requested the finance ministry to offer the tax break as part of input tax credit on Goods and Services Tax (GST), which is levied on capital assets.

New Policy Reportedly Looks at Making Data Centre Investments More Lucrative

According to a Business Standard report, the tax exemption is part of the draft National Data Centre Policy 2025, which is currently being circulated among stakeholders for consultation. The publication claimed to have reviewed the documents and said that the incentives will be provided as input tax credit on GTS on capital assets such as data centre construction, heating, ventilation, and air conditioning. Meity will reportedly request the finance ministry to approve the provision.

Apart from the tax holiday, the draft policy reportedly also suggests that the IT ministry will coordinate with the power ministry and other allied government bodies to ensure that data centres have power accessibility.

Interestingly, the reports about the draft policy on data centres come at a time when OpenAI CEO Sam Altman has confirmed that the artificial intelligence (AI) giant will set up a data centre in India with a capacity of at least 1GW. The company is reportedly seeking local providers to construct the project within the country.

Apart from OpenAI, the project will also help India's growing AI ecosystem, which is increasingly developing and deploying AI models that specialise in Indian regional languages. The country's push for AI was also witnessed recently when AI.tech, a three-year-old startup, became a unicorn with a valuation of $1.5 billion (roughly Rs. 13,224 crore).

The Central government has also extended support for the nation's AI ecosystem. In March 2024, the IndiaAI Mission was introduced to push for AI solutions in sectors that impact social good, such as health, agriculture, governance, education, promotion of startups in AI application development, large-scale skill building and talent development in this industry. Notably, the government has approved an allocation of more than Rs. 10,300 crore for the initiative.