Apple is reportedly pressing the Indian government to tweak a law dating back to 1961 a change it says is vital if it hopes to ramp up its manufacturing footprint in India. At issue is whether Apple, by owning expensive specialized machinery used by its contract manufacturers in India, should be taxed under the country’s income tax rules.

Under the current law, foreign firms holding factories may be viewed as having a “business connection” in India, which could make their global profits liable to Indian taxes.  Apple argues that this classification is a major barrier to expanding its operations here. 2024 and 25, Apple’s vendor partners in India manufactured iPhones whose exports totaled roughly 17.5 billion dollar about 80% of India-made iPhones.  Industry sources believe Apple’s productio exceed those levels by early 2026, provided it faces fewer tax uncertainties.

In China, Apple owns some of these manufacturing machines a to contract makers without running afoul of Chinese tax rules. But India’s law interprets such ownership differently, making Apple’s profits from high end iPhone sales potentially taxable under Indian jurisdiction.

While Apple and industry bodies like the India Cellu Association (ICEA) are pushing for a legislative update, the government finds itself walking a fine line. Relaxing tax rules may attract more investment, but also raises questions about sovereign taxation rights. 

Officials say discussions are ongoing. Some see a potential middle path granting clarity and concessions for specific machinery ownership without weakening India’s broader tax base. The government also recognizes India must remain competitive versus other manufacturing hubs like China or Vietnam. 

For now, Apple’s push underscores how legacy laws while once uncontroversial can become bottlenecks in today’s high-tech, globalized world.

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