Apple reportedly wants Indian govt to change tax law on iPhone factory equipments, here’s why

Apple is reportedly in talks with the Indian government to change the decades-old tax law, which could otherwise require it to pay billions of additional taxes. The company’s ownership of expensive machinery used by its contract manufacturers could make iPhone profits partially taxable in India. Under India’s Income Tax Act of 1961, if a foreign company owns assets within the country that contribute to its business, that ownership can create what’s called a “business connection.” In Apple’s case, the high-end iPhone-making machinery it provides to partners like Foxconn and Tata could make it face local tax obligations.

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In China, Apple retains ownership of the same machines without triggering any local tax obligations and is trying to get the same benefit in India as well. But Indian officials are concerned that any amendment could undermine their sovereign right to tax foreign firms operating within the country.

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Notably, Apple has been doubling down on India as part of its global supply chain strategy. According to Counterpoint Research, iPhone’s market share in India has doubled to 8% since 2022. Meanwhile, India’s share of global iPhone production has quadrupled to 25% in the same period, hinting at the country’s rising importance in Apple’s global supply chain.

Contract manufacturers like Foxconn and Tata have invested over $5 billion in new facilities, including five plants, to meet Apple’s growing demands. But billions of it go into acquiring pricey machines for iPhone assembly, making it too steep for local partners. This could also force Apple to alter its operational model or slow down expansion.

According to a Reuters report, Apple executives have been in ongoing discussions with India’s finance and IT ministries to seek clarity or amendments to the tax code. While the government acknowledges the importance of Apple’s investments, it also wants to ensure fair taxation. “It’s a tough call,” said a senior official, adding that India must balance investor confidence with fiscal sovereignty.

Also read: Samsung Galaxy S24 Ultra price drops to all time low on Amazon ahead of Diwali 2025

Tax experts point to the 2017 Supreme Court ruling involving Formula One, which found the company liable for Indian taxes despite not owning the racetrack, because it exercised control during the event. If Apple-owned machines inside Indian factories are seen as a form of control, it could expose the company to similar tax liabilities, potentially on its global revenue.

Although the industry backs Apple’s case, calling for tax certainty to keep India competitive against China and Vietnam.

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Himani Jha

Himani Jha is a tech news writer at Digit. Passionate about smartphones and consumer technology, she has contributed to leading publications such as Times Network, Gadgets 360, and Hindustan Times Tech for the past five years. When not immersed in gadgets, she enjoys exploring the vibrant culinary scene, discovering new cafes and restaurants, and indulging in her love for fine literature and timeless music. View Full Profile