India has proposed extending a key Apple India tax exemption framework until March 31, 2041, potentially giving the iPhone maker and other qualifying foreign electronics companies 15 years of tax certainty as manufacturing expands across the country.
The proposal would extend an exemption for foreign companies that own and supply machinery, equipment or tooling used by qualifying Indian contract manufacturers. The current framework runs until 2031, while the proposed amendment would push the deadline out by another decade. Apple had lobbied for the change and is positioned to be one of its biggest beneficiaries.
The issue is particularly significant for Apple because it owns high-precision equipment used by contract manufacturers such as Foxconn and Tata Electronics to produce iPhones in India. Without specific tax treatment, ownership of such equipment could potentially raise questions over whether Apple has a taxable business connection in India.
Key Takeaways
- India has proposed extending the relevant tax exemption from 2031 to March 31, 2041.
- Apple lobbied for the change and could be its largest beneficiary.
- The provision covers qualifying foreign companies supplying machinery or tooling to Indian contract manufacturers.
- Qualifying manufacturing must take place within specified customs bonded areas.
- India accounted for about 26% of global iPhone assembly in 2026, according to Counterpoint Research figures cited in the source.
- India’s share was around 6% four years earlier.
- iPhone production value between FY22 and FY26 was approximately $70 billion, including around $51 billion in exports.
- India’s local value addition in mobile phone manufacturing remains around 16%, according to a Counterpoint Research estimate cited in the source.
- The extension remains a proposal, making final legislation an important development to watch.
What Is the Proposed Apple India Tax Exemption?
The proposed Apple India tax exemption would protect qualifying foreign companies from an Indian tax exposure associated with machinery and equipment they own but allow Indian contract manufacturers to use for electronics production.
A draft of the tax amendments cited in the source extends the relief to March 2041, with the stated objective of providing greater tax certainty.
The earlier version arrived in February as part of the Union Budget for 2026-27, with Clause 109 of the Finance Bill amending Schedule IV of the Income-tax Act 2025. The February provision covered the period through tax year 2030-31.
Who Can Qualify for the Tax Exemption?
According to the source material, several conditions apply:
- The foreign company must retain ownership of the capital goods, equipment or tooling.
- Control and direction of the equipment must remain with the Indian contract manufacturer.
- The Indian manufacturer must produce electronic goods for the foreign company for consideration.
- The contract manufacturer must operate within a customs bonded area covered under Section 65 of the Customs Act, 1962.
This means the provision is not a blanket exemption for every electronics manufacturer operating in India.
Why Does the Tax Rule Matter to Apple?
At the heart of the issue is the concept of a business connection under Indian tax law.
A foreign company can potentially become liable for Indian tax on profits attributable to its operations if its activities establish a taxable business connection in the country.
Apple finances and owns high-precision machinery used by Foxconn and Tata Electronics for iPhone manufacturing in India. Because Apple retains ownership while the equipment operates inside Indian factories, uncertainty had existed over whether the arrangement could create an Indian taxable presence.
The exemption addresses that concern by carving qualifying income out of the tax net rather than relying solely on an interpretation of whether a business connection exists.
Why Could India Extend the Exemption From 2031 to 2041?
The longer timeline matters because electronics factories and their tooling are long-term investments.
A tax exemption ending in 2031 provides relatively limited certainty for companies investing in facilities and equipment expected to operate for considerably longer.
Apple’s manufacturing ecosystem in India has already moved into a major expansion phase.
Foxconn is developing a roughly 13-million-square-foot manufacturing facility near Bengaluru International Airport at Devanahalli, spread across close to 300 acres. Investment is estimated at around Rs 20,000 crore, with the facility targeting production capacity of approximately 20 million units annually.
Some accounts cited in the source point to construction continuing until December 2027.
Foxconn has also invested $1.5 billion in a Chennai plant, while Tata Electronics acquired Wistron’s Karnataka operation and expanded its manufacturing presence at Hosur in Tamil Nadu.
Extending the exemption until 2041 would therefore align tax certainty more closely with the long operating life of manufacturing assets and future expansion decisions.
How Big Is Apple’s iPhone Manufacturing Business in India?
Apple’s manufacturing footprint in India has expanded dramatically.
According to Counterpoint Research figures cited in the source, India represented approximately 26% of global iPhone assembly in 2026, compared with just 6% four years earlier. Other estimates place the current figure as high as 28%.
| Metric | Figure |
|---|---|
| India’s global iPhone assembly share in 2026 | 26% |
| Other estimates | Up to 28% |
| Share four years earlier | 6% |
| iPhone production value, FY22–FY26 | About $70 billion |
| Exports within that production | About $51 billion |
| FY26 iPhone exports | Rs 2 trillion |
| Tata Electronics export value, FY22–FY26 | $26.3 billion |
| Foxconn export value over the same period | $25.6 billion |
These figures illustrate how quickly India has developed into a critical part of Apple’s manufacturing network.
Tata Electronics Is Emerging Alongside Foxconn
The expansion is not being driven by Foxconn alone.
Tata Electronics has rapidly strengthened its position after acquiring Wistron’s Indian operations in November 2023.
Across the five PLI years cited in the source, Tata assembled approximately $26.3 billion worth of exported iPhones, compared with $25.6 billion for Foxconn.
Foxconn retained the overall production lead at approximately $38 billion versus Tata’s $35.5 billion, supported by its larger domestic-market production volume.
The growing presence of multiple major manufacturers gives Apple a broader production ecosystem in India rather than dependence on a single assembly partner.
Apple’s India Tax Push Goes Back to 2016
Apple’s efforts to secure long-term manufacturing incentives in India are not new.
The source traces the issue back to May 2016, when Apple CEO Tim Cook and Indian Prime Minister Narendra Modi discussed establishing a deeper production base in the country.
In October that year, Apple submitted a list of requirements that included a 15-year duty exemption on raw materials and capital equipment.
A government panel rejected the original 15-year demand and instead offered a phased localisation programme.
At the time, Apple’s Indian smartphone market share was approximately 2%, while iPhone SE assembly had only recently begun at Wistron’s Bengaluru facility.
Nearly a decade later, Apple’s manufacturing presence in India is substantially larger, and the proposed 2041 timeline would effectively deliver a 15-year certainty period on a narrower tax issue.
Is the Tax Exemption Only for Apple?
No. The proposed exemption is broader than Apple.
It applies to qualifying foreign companies that supply equipment to Indian contract manufacturers operating within eligible bonded zones.
The wording could therefore potentially cover global electronics companies including Google and other manufacturers using Indian contract production arrangements.
Samsung’s situation is different because it operates its own major manufacturing plant in Noida rather than relying exclusively on the same contract-manufacturing model.
Google, meanwhile, assembles Pixel smartphones in India through partners including Foxconn and Dixon and therefore fits more closely with the type of manufacturing arrangement addressed by the provision.
India’s Challenge: Assembly Is Only Part of an iPhone’s Value
India’s rapid growth in iPhone assembly does not mean it captures an equivalent share of the value of each device.
The source cites a Global Trade Research Initiative breakdown of a hypothetical $1,000 iPhone, under which Apple retains roughly $450 through areas such as brand, software and design.
Other major contributors include:
- Taiwan: about $150 through chip manufacturing
- South Korea: about $90 through OLED displays and memory
- Japan: about $85, including camera systems
- US component companies: about $80
- Germany, Vietnam and Malaysia combined: about $45
- India and China: approximately $30 each from assembly
That means final assembly represents only a relatively small share of a smartphone’s total retail value.
Counterpoint Research Director Tarun Pathak has estimated true local value addition in India’s mobile phone sector at approximately 16%, while other estimates have been as low as 15%.
Jobs and Exports Strengthen India’s Manufacturing Case
While assembly captures a relatively small portion of each iPhone’s value, the economic argument extends to employment, exports and the potential development of a domestic component ecosystem.
Foxconn’s Devanahalli facility is targeting approximately 50,000 workers, according to figures cited in the source.
India’s broader electronics production has grown nearly sixfold over 11 years, while the sector supports around 25 lakh jobs.
Across industries, Production Linked Incentive schemes attracted approximately:
- Rs 1.61 lakh crore in investment
- Rs 14 lakh crore in production
- Rs 5.31 lakh crore in exports
Despite this growth, India still represents less than 1% of global electronics trade, estimated at roughly $3 trillion.
What Replaced India’s Smartphone PLI Scheme?
India’s Production Linked Incentive programme for large-scale electronics expired in March 2026.
The country is now shifting attention toward components and deeper localisation.
One of the key initiatives is the Electronics Components Manufacturing Scheme (ECMS).
Launched by the Ministry of Electronics and Information Technology in April 2025 with an initial outlay of Rs 22,919 crore, its allocation increased to Rs 40,000 crore in the 2026-27 Union Budget.
The programme targets sub-assemblies, components and capital equipment representing close to 90% of a mobile phone’s bill of materials.
India has also set an ambitious target of $500 billion in electronics production by 2030-31.
What Does ECMS Aim to Localise?
The scheme includes specific domestic production objectives, including meeting:
- 100% of domestic demand for copper-clad laminates
- 20% of domestic demand for printed circuit boards
- 15% of domestic demand for camera modules
These targets address an important weakness in India’s electronics manufacturing strategy: many high-value components are still imported.
What Are the Risks to Apple’s India Manufacturing Expansion?
Despite India’s manufacturing momentum, several challenges remain.
Heavy Dependence on Imported Components
India continues to import nearly all of its printed circuit boards, estimated at approximately $2 billion annually, while much of the broader electronics component ecosystem remains dependent on China.
Manufacturing Cost Gap
The source states that India’s manufacturing cost competitiveness continues to trail established hubs by approximately 10% to 20%.
Component Tariffs
India imposes duties exceeding 10% on 35 components, while Vietnam and China maintain a 10% cap, according to the source.
US Tariff Uncertainty
Tariff differences affecting Chinese- and Indian-made products have influenced Apple’s manufacturing strategy. Any significant change in US trade policy could alter the economics of producing iPhones in India for export.
Limited Local Value Addition
Moving final assembly to India is only the first stage. Developing domestic manufacturing for displays, semiconductors, camera modules, circuit boards and other components is considerably more complex.
The source also notes that the government has not published an estimate of the revenue potentially forgone through the proposed long-term exemption.
What Happens Next With the Apple India Tax Exemption?
Several developments will determine the ultimate importance of the proposal.
First, the March 2041 deadline must survive the legislative process. The source emphasizes that the extension remains a draft proposal rather than a finalized provision.
Second, India’s post-PLI manufacturing strategy will need to increase component localisation if the country wants to push domestic value addition significantly beyond the current estimated 16%.
Third, future capacity commitments from Apple, Foxconn, Tata Electronics and other global manufacturers will indicate whether longer tax certainty is influencing new investment decisions.
Finally, international tariff differences—particularly those affecting US-bound smartphones manufactured in India versus China—could remain a major factor in Apple’s production decisions.
India Has Won iPhone Assembly; Components Are the Next Test
India’s progress in smartphone manufacturing over the past decade is substantial. The country has moved from a relatively small role in Apple’s supply chain to producing roughly a quarter of global iPhone output.
The proposed extension until 2041 could provide Apple and other qualifying manufacturers with the longer-term tax certainty needed when making multibillion-dollar decisions about factories and production equipment.
But the next stage of India’s electronics strategy is more difficult.
Assembly facilities can generate jobs and exports, but capturing a larger portion of each smartphone’s economic value requires a deeper ecosystem encompassing components, materials, precision tooling and advanced manufacturing.
The proposed machinery exemption could therefore reinforce India’s position as an iPhone assembly hub. Whether it also helps India move further up Apple’s global value chain will depend on component localisation, future investment, manufacturing costs and trade policy.
As the source concludes, India’s manufacturing base now accounts for around a quarter of global iPhone output and supports tens of thousands of jobs—but the tax concession by itself does not guarantee that India will capture a substantially larger share of the value inside every device.
