Experts believe that the adoption of the Lok Sabha Tax and Other Laws (Amendment) Act 2026 on Thursday will stimulate investment growth in India's burgeoning data center sector. This is made possible by recognizing leased properties within the tax system and abolishing notification requirements for relevant foreign companies and data centers.
The new legislation removes the need for foreign companies and certain data centers to obtain separate central government notifications to avail themselves of the existing tax exemption until March 31, 2047. Furthermore, the definition of 'specific data center' is expanded, now including properties managed by an Indian company under a lease model, thereby integrating them into the current tax base.
Amit Sarin, Managing Director of Anant Raj, noted that the proposed changes are a positive step toward supporting the next phase of India's digital infrastructure growth, as data centers will play an increasingly vital role in the country's digital economy. He emphasized that given the rising demand for artificial intelligence (AI), cloud services, and data storage, the sector requires a practical, predictable, and adaptable policy framework aligned with evolving business models.
Sarin added that these measures could attract more global investment and support the expansion of hyperscale and AI-ready data center capacities in India. He also mentioned that Anant Raj stands to benefit from these reforms, as the company has committed to investing over INR 20,000 crore in its data center and cloud services business over the next four to five years.
Ravi Mahajan, Tax Partner at EY India, stated that the amendments reduce approval requirements for both foreign companies and Indian entities in the supply chain, which decreases uncertainty and accelerates investment. According to him, allowing an Indian company to operate a data center under a lease agreement, instead of requiring ownership, will ease initial costs and enhance the competitiveness of Indian data centers in the global market.
Shobhit Agarwal, CEO of Anarock Capital, believes that the biggest impact will come from expanding the definition of specific data centers to include leased properties managed by Indian companies, as well as eliminating the need for dual government notification. He pointed out that this resolves a structural issue that has long constrained lease-based operators. Agarwal also added that the changes, combined with tax holidays until 2047 for foreign companies procuring data center services in India, will lower investment risks and speed up capital deployment.
S. R. Patnaik, Partner (Head of Taxation) at Cyril Amarchand Mangaldas, indicated that recognizing data center leasing models reflects the industry's commercial structure, where ownership of land, buildings, energy infrastructure, and operations is often distributed among different entities. He suggested that the amendment could spur buy-sell transactions followed by leasing, the creation of specialized data center platforms, infrastructure funds, and ultimately, monetization models similar to REIT or InvIT.
However, experts stressed that the next phase of reforms must focus on implementation. Industry specialists argue that there needs to be a clear definition of further rationalization of tax and infrastructure incentives, acceptability conditions, and safe harbor provisions. Patnaik added that the success of the reforms will depend on simple and stable implementation rules covering taxation, land, power, and other regulatory aspects.
Rahul Patel, Partner at Gandhi Law Associates, stated that greater clarity in implementation should be the next priority, along with equal treatment for domestic operators and further rationalization of tax and infrastructure incentives to maintain investment momentum.
Furthermore, according to real estate consultant Savills India, new data center capacity in India grew to 258 MW IT in the first half of 2026 compared to 162 MW IT in the first half of 2025, marking a 59.3 percent year-on-year increase. The country's total operational reserve reached 1.8 GW IT. The Indian data center market is projected to expand significantly, with total capacity nearly quadrupling to exceed 7 GW IT by 2030. Annual capacity additions are expected to accelerate to 350–500 MW IT between 2026 and 2030, almost double the 150–250 MW IT added annually in 2022–2025. In 2026, both capacity additions and absorption are expected to exceed 600 MW IT, according to Savills India.
