In its 2026–27 budget, India said foreign companies can supply and own machinery used by contract manufacturers in customs-bonded areas for five years without that ownership creating an income-taxable “business connection.”

The change was announced by Finance Minister Nirmala Sitharaman as part of the 2026–27 annual budget. It is framed as a measure to promote electronics manufacturing for contract manufacturers and is intended to remove income-tax exposure that could arise solely from a foreign firm owning equipment used in India. The provision applies only to factories set up in customs-bonded areas and is stated to run through the 2030–31 tax year; goods sold into India from such facilities would face import duties.