India is making a substantial investment in its digital infrastructure. According to reports, the government is contemplating tax relief lasting up to two decades for data center developers who achieve specific goals related to capacity expansion, energy efficiency, and employment generation.

This draft policy, currently being shared with stakeholders for feedback, aims to establish India as a worldwide center for cloud infrastructure, artificial intelligence modeling, and digital services during a period of rapidly increasing demand for data storage and computational resources.

Key elements of the draft proposal
The 2025 draft policy fundamentally outlines an attractive incentive framework:
Tax exemption: Extending up to 20 years, contingent on meeting capacity, efficiency, and job creation benchmarks.

GST input tax benefits: Expected to cover capital investments including construction materials, cooling infrastructure, HVAC systems, and electrical components.

International companies: Organizations that lease or manage a minimum of 100 MW capacity could obtain permanent establishment recognition in India.

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Artificial intelligence initiative: Qualifying companies may be encouraged to establish AI research centers or global capability facilities within the same location as their data operations.

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These measures will facilitate employment opportunities while building domestic expertise in cutting-edge technologies like artificial intelligence, cloud computing, and cybersecurity across metropolitan areas as well as smaller cities.

India's data center sector has experienced remarkable expansion, achieving a 24 percent annual growth rate since 2019. JLL projects that 795 MW of additional capacity will become operational by 2027, bringing the total to 1,825 MW. Current occupancy levels of 75-80 percent indicate that demand significantly exceeds available supply.

With India's digital economy continuing to expand, this demand will grow even stronger, highlighting the critical need for advanced infrastructure capable of supporting such growth.

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The draft policy additionally describes the government's approach to addressing the sector's two primary challenges: land availability and power supply.