Apple Lobbying Centre To Relax Income Tax Laws

Apple is reportedly lobbying the Centre to relax income tax laws regarding the ownership of “high-end” iPhone machinery that the big tech giant provides to its contract manufacturers.

Sources told Reuters that Apple executives have held talks with Indian officials in recent months to tweak the law so that the company is not taxed for owning the machinery. As per the report, the company fears that the taxes would hamper its future growth in the country. 

For context, Apple’s contract manufacturers in India, Foxconn and Tata, have infused billions of dollars to set up units in the country. However, millions of those expenses go towards acquiring these pricey machines for iPhone assembly.

“Contract manufacturers cannot put up money beyond a point,” said the first industry source… If the legacy law is changed, it will become easy for Apple to expand … India can become more competitive globally,” a source reportedly said. 

At the centre of the dispute is the Income Tax Act, 1961, which treats foreign ownership of manufacturing equipment as a “business connection”. This makes Apple’s iPhone profits reportedly liable for taxes in the country. 

As per the report, Apple potentially faces billions of dollars in additional taxes if the company tweaks its “business practices” in the country without convincing the Centre to change the taxation laws covering foreign ownership of equipment used in India.

Meanwhile, a senior Indian official reportedly said that discussions on the matter were ongoing, adding that it is a “tough call” considering Apple’s increased investments are “equally important”. “India needs investments. We have to find a solution,” added the official. 

However, the government reportedly appears cautious as any changes to the income tax laws could diminish its sovereign right to tax a foreign company.

The development comes at a time when the Cupertino-based giant has been aggressively expanding its manufacturing capacity in the country. As part of this, it began producing its latest iPhone 17 series in India right from its launch.

Earlier this month, reports claimed that Apple exported a record $10 Bn worth of iPhones from India between April and September, up 75% from $5.71 Bn in the year ago period. The company plans to shift its entire assembly of iPhones sold in the US to India by as early as next year as trade tensions between Washington DC and Beijing peak. 

The export coincides with the company ramping up the production of iPhones in India. In April this year, Tata Electronics’ Hosur plant and Foxconn’s new Bengaluru unit commenced production, thereby expanding the big tech major’s Indian manufacturing network to five factories. 

Just a few days back, Tamil Nadu’s industries minister TRB Rajaa said that Foxconn has committed INR 15,000 Cr to bolster its operations in the state and fuel in-house R&D efforts.