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India-France Tax Treaty Gets Major Overhaul
23 Feb
Summary
- India and France amended the 1992 Double Taxation Avoidance Convention.
- New protocol modifies tax rates on dividends and capital gains.
- Changes aim to boost investment, technology, and personnel flow.
As of February 23, 2026, India and France have entered into an amending protocol to their Double Taxation Avoidance Convention (DTAC), originally established in September 1992. This significant update aims to bolster tax certainty within the economy and foster increased investment, technology transfer, and the movement of personnel between the two countries, thereby strengthening their economic relationship.
The revised protocol introduces changes to taxation on dividends, replacing the previous flat 10% rate with a split system: 5% for holdings of at least 10% of the capital and 15% for all other holdings. Additionally, the definition of 'Fees for Technical Services' has been updated to align with the India-US Double Taxation Avoidance Agreement, and the scope of Permanent Establishment has been broadened to include 'Service PE'.
This amendment is poised to attract French foreign direct investment into India and allow French companies to repatriate higher net profits. While the protocol vests capital gains taxing rights with the source state, potentially securing tax revenue for India, it might also present a deterrent for French foreign portfolio investors. Experts note that the application of most favoured nation clauses could further reduce dividend withholding tax outflows, though this remains subject to specific government notifications.
