Apple is lobbying the Indian government to revise income tax regulations that could impact its growing smartphone operations in the country, Reuters news report said. The US-based tech giant is seeking relief from taxes on high-end iPhone machinery it provides to its contract manufacturers, a move crucial for its expansion beyond China.
India’s Smartphone Market: A Growing Opportunity for Apple
India, the world’s second-largest mobile market, has seen Apple’s market share double to 8 percent since 2022, according to Counterpoint Research. While China still produces 75 percent of global iPhone shipments, India’s share has surged to 25 percent over the same period.
Latest IDC report indicated that Apple has 9.7 percent share in the Indian smartphone market during the first-half of 2025.
To support this growth, Apple’s contract manufacturers, including Foxconn and Tata, have invested billions in establishing five production plants. Much of this investment goes toward acquiring specialized iPhone assembly equipment.
The Tax Challenge: Business Connection Rules
Under India’s Income Tax Act of 1961, Apple’s ownership of machines within local factories could be considered a “business connection,” making the company liable for Indian taxes on iPhone profits. This differs from China, where Apple provides machinery to contract manufacturers without incurring taxes.
Industry sources reveal Apple executives have held talks with Indian officials to modify the law. “Contract manufacturers cannot put up money beyond a point. If the legacy law is changed, it will become easy for Apple to expand,” said one source.
Government Weighs Investment vs. Sovereignty
Smartphone manufacturing is a key priority under Prime Minister Narendra Modi’s agenda. However, India remains cautious about altering tax rules, balancing the need for foreign investment with its sovereign right to tax companies.
Billions at Stake: Specialized Equipment Costs
The machinery Apple provides can cost billions, creating potential tax exposure under current rules. Experts cite a 2017 Supreme Court case involving Formula One, which paid taxes for activities even without owning the circuit, as a precedent for how Apple could be taxed.
According to Riaz Thingna of Grant Thornton Bharat LLP, “If the activities of Apple constitute a business connection, then global revenue may be used as a basis to compute income attributable in India, leading to billions in tax exposure.”
Industry Support and Future Outlook
The India Cellular & Electronics Association (ICEA), which supports Apple, has called for law changes, emphasizing that tax certainty is critical for companies investing heavily in specialized equipment.
Apple’s investment commitment involves spending $600 billion in the U.S. over four years. This includes investment in a AI server factory in Houston, Texas, creating approximately 20,000 jobs. Apple is also doubling its Advanced Manufacturing Fund to $10 billion and enhancing investments in artificial intelligence and silicon engineering.
With Apple opening its own retail stores in India and Foxconn shipping $7.4 billion worth of products in 2025, the stakes are high. Adjustments to tax laws could accelerate Apple’s expansion, helping India compete with China and Vietnam as a global smartphone manufacturing hub.
Baburajan Kizhakedath
