Apple Gets Tax Clarity in India, Eases Path for Faster iPhone Manufacturing Expansion

Apple has received a significant regulatory boost in India just as it ramps up efforts to expand local iPhone production, clearing a long-standing hurdle that had complicated its manufacturing investments.

A recent revision to India’s income tax framework has removed uncertainty around how foreign companies fund equipment used by contract manufacturers. The move gives Apple greater confidence to directly finance high-end production machinery without triggering unexpected tax liabilities — a concern that had previously slowed its expansion plans.

Apple does not run factories in India itself. Instead, it relies on partners such as Foxconn and Tata to assemble iPhones. However, earlier tax rules created a grey area. If Apple paid for machinery installed at these facilities, authorities could interpret it as a “business connection,” potentially exposing the company to taxes on profits generated in India.

This ambiguity placed India at a disadvantage compared to countries like China, where such risks do not exist. To avoid complications, Apple’s manufacturing partners had to shoulder the cost of expensive equipment themselves — often investing billions of dollars — which limited how quickly production lines could scale.

That roadblock has now been removed.

According to a Reuters report, the government has approved changes allowing foreign firms to provide equipment to local manufacturers operating in certain export-oriented zones without attracting additional tax exposure. The updated rule offers a five-year window during which such investments will remain exempt.

Apple had been seeking this clarity for some time. As a famous publication reported, the company was worried that paying for iPhone-making machines in India could lead to taxes on its sales profits, something it has not faced in other manufacturing hubs. The concern was serious enough that Apple chose to stay hands-off while its partners bore the financial burden instead.

Revenue Secretary Arvind Shrivastava confirmed the shift, saying, “If you bring your machine, and that machine is used by a local manufacturer to produce something, we will exempt you for 5 years.”

The assurance gives Apple a predictable framework to plan its investments and expand capacity without second-guessing future tax implications.

The timing is crucial. Apple has been steadily diversifying its supply chain and reducing dependence on China, with India emerging as a key alternative. The country already assembles several recent iPhone models, and output has grown consistently over the past few years.

Directly funding advanced equipment is expected to lower costs, speed up installation of production lines, and help Apple respond more quickly to global demand. It also allows the company greater oversight of manufacturing quality and timelines.

For India, the change aligns with its broader ambition to become a global electronics manufacturing hub. Smartphone assembly requires highly specialised and expensive tools, and easing investment barriers makes the ecosystem more attractive for multinational players.

While Apple continues to navigate other regulatory challenges in India, this tax relief stands out as a clear win. In practical terms, the company can now invest in factory infrastructure with confidence — a step that could accelerate iPhone production and deepen India’s role in Apple’s global supply chain.