India Clears Key Tax Hurdle for Apple, Easing iPhone Manufacturing Expansion Plans

Highlights

• India allows foreign companies like Apple to directly fund manufacturing equipment for local contract manufacturers without triggering tax liabilities.
• The exemption, valid until 2030‑31 for factories in customs‑bonded zones, removes a major hurdle.
• The move strengthens Apple’s manufacturing ecosystem with partners like Foxconn and Tata.

(Photo by Medhat Dawoud on Unsplash)

Apple has secured a major boost to its manufacturing ambitions in India after the government approved changes that allow the company to directly fund iPhone production equipment without facing additional tax exposure. The announcement was made as part of Finance Minister Nirmala Sitharaman’s Union Budget 2026-27, presented on Sunday.

Foreign Funding of Manufacturing Equipment

According to a Reuters report, the Indian government has amended its income tax rules to let foreign companies provide manufacturing machinery to local contract manufacturers without triggering tax liabilities. This move addresses long-standing concerns raised by Apple around potential taxation linked to funding high-end production equipment in India.

Previously, Apple had been lobbying for regulatory clarity. The company has been reported concerned that directly paying for iPhone manufacturing machinery could be treated as a “business connection” under Indian tax law. Such a classification could have exposed the company to taxes on its local sales profits, even though production is handled entirely by third-party manufacturers.

With the new measure in place, Apple can now finance equipment for its contract manufacturers in select export-focused zones for up to five years without incurring additional tax risk. This change significantly lowers barriers for Apple to scale up iPhone manufacturing operations in the country.

Smartphone manufacturing remains a central pillar of Prime Minister Narendra Modi’s industrial strategy. However, India’s tax framework had earlier forced Apple’s key partners, including Foxconn and Tata, to invest billions of dollars themselves in manufacturing equipment, unlike the company’s arrangements in China.

India clarified that the amendment is intended “to promote manufacturing of electronic goods for a contract manufacturer” and ensures that simple ownership of machines by a foreign company does not result in taxable income or tax obligations.

Faster Scale-up and Higher Confidence

The revised rule will remain valid until the 2030-31 tax year and applies only to factories located in customs-bonded zones, which are technically treated as being outside India’s customs territory. Devices sold domestically from these facilities would still attract import duties, making them primarily suitable for export-oriented manufacturing.

“Any income arising on account of providing capital goods, equipment or tooling to a contract manufacturer, being ‌a company resident in India, is eligible for exemption,” the government stated in an explanatory budget document.

The policy shift comes as Apple continues to deepen its presence in India while reducing dependence on China. Research firm Counterpoint notes that the iPhone’s market share in India has doubled to 8 percent since 2022. While China still accounts for about 75 percent of global iPhone shipments, India’s share has reportedly surged to 25 percent over the same period.

Reuters previously reported that Apple had held multiple discussions with Indian officials in recent months, seeking amendments to the law amid fears that existing regulations could slow its long-term growth plans in the country.

Apple did not immediately respond to a request for comment.

FAQs

Q1. What tax change did India introduce for Apple?

Answer. India amended its income tax rules to allow foreign companies like Apple to provide manufacturing equipment to local contract manufacturers without creating a taxable “business connection.” This means Apple can directly fund iPhone production machinery without facing extra tax liabilities.

Q2. How does the new India tax benefit Apple’s iPhone manufacturing in India?

Answer. The new rule, valid until the 2030‑31 tax year, lets Apple finance equipment for factories in customs‑bonded zones for up to five years. This lowers barriers to scaling up iPhone production in India, especially for export‑focused manufacturing.

Q3. What is the broader impact of new Tax policy shift in India for Apple?

Answer. The change supports Prime Minister Modi’s industrial strategy, strengthens Apple’s partnerships with Foxconn and Tata, and boosts India’s role in global iPhone shipments. India’s share of iPhone production has surged to about 25%, while Apple’s market share in India has doubled to 8% since 2022.

Also Read –

https://www.mymobileindia.com/foxconn-to-boost-iphone-production-in-india-with-1-5-billion-investment-adds-new-semiconductor-plant/

https://www.mymobileindia.com/apple-expands-iphone-production-in-india-with-new-tata-and-foxconn-plants/