Budget seeks to attract global business and investment providing fillip to toll manufacturing, MAT exemptions

Seeking to attract global business and investment into India, Union Finance Minister Nirmala Sitharaman in her budget presentation Sunday (February 1, 2026), among other things, providing a fillip to toll manufacturing in the country proposed exempting non-residents from paying income tax for five years. Further, she also proposed to exempt minimum alternate tax to all non-residents who pay tax on a presumptive basis.

The Finance Minister informed that proposed five-year exemption for toll manufacturing would be applicable to any non-resident who provides capital goods, equipment or tooling, to any domestic toll manufacturer in a bonded zone, in other words, a custom-controlled area. This would apply to those engaged in manufacturing of electronic goods.

Further, seeking to rationalise the minimum alternate tax (MAT) regime and facilitate transition to a new regime, the finance minister also proposed to exempt all non-residents from paying MAT who pay them on presumptive basis. For context, non-residents who avail the presumptive scheme of taxation are exempted from MAT provisions. The proposed provision extends this exemption to all non-residents who pay tax on presumptive basis.

According to Pallavi Dinodia, Co-Chair of the Direct Tax Committee at the industry body PHDCCI this would help provide for “tax certainty, cash-flow predictability and fewer disputes”.

Among other major provisions, the Budget also proposed to extend a tax holiday until 2047 for foreign companies looking to procure data centre services in India. “It will, however, need to provide services to Indian customers through an Indian reseller entity,” Ms. Sitharaman stated.

Reflecting on the overall set of measures, Riaz Thingna, Partner at Grant Thornton Bharat told The Hindu, “These measures can unlock long-term capacity investments, deepen the data-centre ecosystem, and make India a preferred base for secure, scalable cloud delivery to the world.”