NEW DELHI, Feb 23 (Reuters) - India has amended its tax treaty with France and removed the most‑favoured‑nation clause, the finance ministry said on Monday. The government said it has also modified
India Revises Tax Agreement with France, Reduces Dividend Tax
By Nikunj Ohri and Aditya Kalra
NEW DELHI, Feb 23 (Reuters) - India has revised its three‑decade‑old tax treaty with France, which will help major French companies save millions of dollars in dividend levies, while it also broadens New Delhi's powers to tax certain transactions, the finance ministry said on Monday.
Key Changes in the Tax Treaty
Under the new rules, French companies holding at least 10% in an Indian entity will pay a 5% tax on dividends, down from 10% earlier. For minority French shareholdings of under 10% in Indian companies, however, dividend tax will rise from 10% to 15%.
Reuters was first to report the details of the planned tax treaty in December.
The new tax treaty would likely have implications for large French portfolio investors, as well as companies like Capgemini, Accor, Sanofi, Pernod Ricard, Danone and L'Oreal -- all of which have expanded their presence in India in recent years.
Implications for French Investors
The revised pact also gives India the right to tax capital gains, and impose taxes on any French entity's share sale, even when it holds less than 10% of an Indian company.
The move could impact France-based foreign portfolio investors that owned $21 billion worth of shares in Indian companies as of January 2026, according to Indian share depository data.
It also scraps the so-called most‑favoured‑nation (MFN) clause following a landmark Indian Supreme Court decision in late 2023 that led to disagreements on how to interpret the clause.
Impact of Supreme Court Ruling
If a country has an MFN clause with India under a treaty, it would typically start claiming lower tax rates if New Delhi strikes more favourable tax terms later with another OECD nation.
The Supreme Court, however, ruled that countries can't automatically start doing so, creating tax uncertainty. The issue became one of the main drivers of the renegotiation and the countries ultimately agreed to delete the provision.
Bilateral trade between India and France stood at $15 billion last year. During French President Emmanuel Macron's India visit last week, the two countries announced a defence cooperation to jointly produce Rafale fighter jets, as well as helicopters.
(Reporting by Nikunj Ohri, edititng by Andrei Khalip)
