India proposes tax breaks for contract manufacturing to aid Apple, others

India has proposed extending tax breaks for contract manufacturing, a move that could prevent companies like Apple from facing tax exposure on profits tied to machinery supplied to local manufacturers.

The proposal addresses concerns that India’s tax laws could treat ownership of such machinery as a 'business connection,' potentially subjecting profits—such as those from iPhone sales—to taxation. Apple had previously raised fears over this interpretation, which differs from practices in markets like China.

Separately, the Income Tax Department reported over 50 million income tax return (ITR) filings for assessment year (AY) 2026-27 by 29 July, achieved in less than four months. Around 12 million returns were filed in the eight days leading up to the 31 July deadline. The total surpasses the previous year’s 73 million filings for AY 2025-26, reflecting faster compliance and digitisation efforts.

In other tax reforms, dividends paid by Special Purpose Vehicles (SPVs) to REIT and InvIT investors will now be tax-free, regardless of the SPV’s tax regime. Additionally, India is offering a 15-year income tax holiday to attract foreign firms trading rough diamonds, aiming to boost activity in Special Notified Zones and strengthen the diamond industry’s competitiveness.