Apple has received significant regulatory relief from the Indian government, removing a longstanding tax-related bottleneck that had hindered the expansion of iPhone manufacturing in the country. The change, announced as part of the 2026-27 Union Budget presented by Finance Minister Nirmala Sitharaman on February 1, revises income tax rules to allow foreign companies, such as Apple, to supply or finance high-end manufacturing equipment to local contract manufacturers without triggering additional tax liabilities.
Previous law exposed Apple to heavy Indian taxes
Previously, providing specialised machinery for iPhone production risked creating a 'business connection' under Indian tax law, potentially exposing Apple to taxes on local profits even though assembly is handled by third-party partners such as Foxconn and Tata. This uncertainty forced contract manufacturers to bear the substantial cost of equipment themselves, slowing the scaling of production capacity and placing India at a disadvantage compared with other manufacturing hubs.
Revenue Secretary Arvind Shrivastava confirmed the adjustment, stating,“If you bring your machine, and that machine is used by a local manufacturer to produce something, we will exempt you for 5 years. We are giving them certainty.”
The exemption applies for up to five years (through the 2030-31 tax year) and covers operations in customs-bonded areas, which are treated as outside India's domestic customs territory to promote exports. The measure aims to boost electronics manufacturing by reducing financial risks and encouraging direct investment in advanced production tools.
Apple now able to fund machinery more freely in India
The relief is expected to enable Apple to fund machinery more freely, lower overall costs for its partners, accelerate capacity growth, and support the company's broader strategy to diversify supply chains away from China. Apple has steadily increased iPhone assembly in India in recent years, with production volumes rising and newer models now being manufactured locally. The change provides greater regulatory certainty for further expansion.
This development comes amid Apple's ongoing efforts to ramp up Indian output, including ambitious targets to shift a substantial portion of global iPhone production, particularly for the US market, to Indian facilities in the coming years.
