India Plans to Extend Contract Manufacturing Tax Incentives to 2041, Benefiting Apple
0xBroomberg
India plans to extend a tax exemption for foreign contract manufacturers from 2031 to 2041, directly addressing Apple's lobbying push and giving its iPhone production expansion ten extra years of tax certainty — the most critical policy anchor yet for Apple's supply-chain shift away from China.
What problem does this tax break actually solve?
Apple supplies high-end production equipment to Indian contract manufacturers such as Foxconn and Tata. Indian tax law could classify that equipment as a "business connection," pulling a share of Apple's global iPhone profits into India's tax net.
In plain terms = you lend a machine to someone, and the tax authority says that means you're "doing business" here — so your entire income is taxable.
This risk does not exist in China — it is a hurdle unique to shifting production to India.
India introduced an exemption in February, but it expired in 2031. The new draft extends the deadline to March 31, 2041 — roughly ten more years.
What does the exemption cover?
Equipment provision: income earned by foreign firms supplying production equipment to Indian contract manufacturers is tax-exempt through 2041.
Component storage (new): income from storing and supplying electronic components to manufacturers in India is likewise exempt through 2041.
Eligible products span smartphones, tablets, laptops, hearing aids, and wearable electronics. This means → the beneficiaries go beyond Apple — every foreign electronics firm using contract manufacturing in India falls within scope.
Why is it limited to bonded zones?
The exemptions apply only to factories and warehouses inside customs-bonded zones — areas technically treated as outside India's customs border.
Products sold from these zones into India's domestic market still incur import duties.
This means → the policy's core beneficiaries are export-oriented producers — firms that treat India as a "world factory," not as a gateway to India's own consumer market.
Where does Apple's India capacity stand?
Counterpoint Research estimates India will produce 26% of global iPhones in 2026, up from just 6% four years ago.
This reflects a rapid shift of Apple's production center of gravity from China to India — and tax certainty is the prerequisite for that trajectory to hold.
Riaz Thingna, partner at Grant Thornton India, said: "The proposed tax changes will allow foreign firms to store and transfer critical equipment and components for contract manufacturers in India, helping mitigate supply-chain risks from trade uncertainty while providing greater tax certainty."
What is still uncertain?
The draft must pass both houses of India's parliament before taking effect.
In plain terms = the policy direction is clear, but whether it lands on schedule depends on the legislative process — and India's parliamentary timetable is not always predictable.
For investors tracking Apple's supply chain, the key watch item is: when the draft enters the parliamentary agenda, and whether its terms get amended along the way.
Content is for reference only, not financial advice.