Apple is reportedly lobbying hard with the Indian government to modify its income tax law. According to an exclusive report by news agency Reuters, Apple wants the government to change a change a 1961 law to ensure that the company is not taxed for ownership of high-end iPhone machinery it provides to its contract manufacturers. The issue is reported to be seen as a hurdle to the company’s future expansion in India. Apple executives have held talks with the Indian officials in recent months to tweak the law as it could expose Apple to substantial tax liabilities if it were to directly own the specialized equipment used by its contract manufacturers in India. According to a recent report, quoting official data, “In FY25, Apple through its vendors produced $22 billion worth of iPhones, of which 80% or $17.5 billion worth of made-in-India iPhones were exported.” Industry experts predict Apple could surpass last year’s production and export figures by March 2026, though potential U.S. tariffs and trade restrictions may pose challenges. “At the current run rate, Apple is expected to cross the production and export figures of last year.

Why Apple wants India to change the law

Currently, under India’s Income Tax Act, a foreign company that owns equipment used by a local business is seen as having a “business connection.” This connection would make Apple’s global iPhone profits taxable in India, a financial burden that could run into billions of dollars.A senior government official and several industry sources confirm that this legal hurdle is a major roadblock to Apple’s ambitious plans. “Contract manufacturers cannot put up money beyond a point,” one industry source stated. “If the legacy law is changed, it will become easy for Apple to expand… India can become more competitive globally.”

What is the rule in China, Apple’s biggest manufacturing base

In China, Apple procures the machines used to make iPhones and gives them to its contract manufacturers, and is not subject to tax even though it still owns them. But that’s not possible in India as the Income Tax Act would consider such ownership by Apple as a so-called “business connection”, making the U.S. firm’s iPhone profits liable for Indian taxes, said a senior government official and two other industry sources.

What’s at stake for India

India needs to be cautious as China and Vietnam could race ahead as major smartphone export hubs due to their lower tariffs on phone parts if electronic companies do not see advantage. A senior Indian official told Reuters that “discussions on taxation rules impacting Apple are ongoing”, but government is cautious as any changes to the law could diminish its sovereign right to tax a foreign company.“It’s a tough call,” said the official. He at the same time highlighted that Apple’s increased investments are equally important. “India needs investments. We have to find a solution.”The India Cellular & Electronics Association (ICEA) is said to back Apple. According to the report, in a confidential representation to the government, ICEA has called for changes to the law, saying tax certainty is “paramount for businesses seeking to expand and scale.” “Typical CMs (contract manufacturers) are unable or unwilling to invest in such large quantities of specialized equipment … The cost of the equipment can rise to billions of dollars,” ICEA reportedly said, without naming any company.