India has handed Apple a significant policy win, easing a long-standing tax concern that had been quietly slowing the company’s manufacturing expansion in the country. The government has now amended income tax rules to allow foreign companies to supply machinery to Indian contract manufacturers for up to five years without triggering tax liabilities — a move aimed squarely at strengthening India’s electronics manufacturing ecosystem.

The decision was announced as part of Finance Minister Nirmala Sitharaman’s Union Budget for 2026–27 and is expected to accelerate Apple’s India growth plans.

Why Apple Was Worried About India’s Tax Rules

Unlike China, where Apple freely funds high-end manufacturing equipment for its suppliers, India’s income tax framework posed a tricky problem. If Apple paid for iPhone-making machines used by local contract manufacturers, authorities could treat it as a “business connection” — potentially exposing Apple to taxes on profits from iPhone sales in India.

That risk forced Apple’s key partners, including Foxconn and Tata, to invest billions of dollars themselves in expensive machinery, slowing scale-up and raising costs.

Apple had been pushing New Delhi for clarity, warning that the ambiguity could hinder its long-term manufacturing roadmap in the country.

What the New Rule Changes — Clearly

To address this, the Indian government confirmed that mere ownership of machinery by a foreign company will no longer create a tax liability, provided certain conditions are met.

Under the revised rule:

• Foreign firms can supply machines, equipment, or tooling to Indian contract manufacturers
• The income linked to such arrangements will be tax-exempt for five years
• The exemption applies only to factories set up in customs-bonded areas
• The policy will remain valid until the 2030–31 tax year

Revenue Secretary Arvind Shrivastava said the aim was to provide certainty to global companies. If foreign firms bring in machinery and Indian manufacturers use it to produce goods, the government will exempt them from tax for the defined period.

Why This Matters for Apple — and India

Apple has been steadily expanding its India footprint as part of its broader strategy to diversify beyond China. According to Counterpoint Research, iPhones now command 8% of India’s smartphone market, double their share in 2022. On the global supply side, India’s contribution to iPhone production has jumped from negligible levels to around 25% since 2022, while China still accounts for roughly 75%.

The new tax clarity allows Apple to directly fund high-value machinery, reducing the financial burden on its partners and enabling faster production ramp-ups — especially for export-focused facilities.

Industry experts believe this removes one of the biggest deal-breakers for large-scale electronics manufacturing in India.

A Strategic Win for the Government’s Manufacturing Agenda

Smartphone and electronics manufacturing are central to Prime Minister Narendra Modi’s push to turn India into a global manufacturing hub. The updated tax framework aligns with that goal, particularly for export-oriented units operating in bonded zones.

Devices sold domestically from such factories will still attract import duties, making these facilities most attractive for global supply chains — exactly where Apple wants to grow.

How Apple Compares to Rivals Like Samsung

Interestingly, the earlier tax rules did not significantly affect Apple’s South Korean rival Samsung, which manufactures most of its smartphones in company-owned Indian plants rather than relying on contract manufacturers.

For Apple, which depends heavily on partners, the amendment levels the playing field.

Final Words

This policy tweak may look technical on paper, but its impact could be massive. By removing tax uncertainty around machinery ownership, India has sent a strong signal to Apple and other global electronics giants: scale up without fear.

For Apple, it means faster expansion, lower costs for partners, and deeper roots in India’s manufacturing story. For India, it’s another calculated step toward becoming a serious alternative to China in the global electronics supply chain.