India and France have agreed to revise their 1992 tax treaty, giving France lower dividend taxes while allowing India greater rights to tax French investors’ share sales.
Dividend tax rates will change: French firms with over 10% stake in an Indian company will face a reduced 5% tax, while minority shareholders will see their rate rise to 15%.
The new treaty also grants India full source-based taxation rights on capital gains, impacting major French companies and portfolio investors with significant India exposure.
India, France Agree to New Tax Treaty Altering Dividend and Capital Gains Rules
Indian and French officials have agreed on the terms of the new deal, which is likely to be signed in the coming weeks. The treaty is also subject to final approval by Prime Minister Narendra Modi’s cabinet
India-France
Summary
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On Friday, India and France struck a deal that revises the 1992 treaty and will alter the tax on dividends paid by Indian units to French parent companies, potentially saving millions for firms with major operations in India, reports said, citing documents.
In return, India will expand its powers to tax share sales by French investors and revoke the “most favoured nation” status of France that gave it certain tax advantages, Reuters reported. Indian and French officials have agreed on the terms of the new deal, which is likely to be signed in the coming weeks. The treaty is also subject to final approval by Prime Minister Narendra Modi’s cabinet, the report said, citing official documents.
India–France Bilateral Trade
Bilateral trade between India and France was at $15 billion in 2024, and Modi and French President Emmanuel Macron have been strengthening ties. Paris and New Delhi have been working to revamp the tax treaty since 2024 to modernize it by adopting global standards on tax transparency. “The proposed amending protocol will boost the flow of investment, technology and personnel between India and France, and will provide tax certainty,” said one of the Indian government documents from August.
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What the New Treaty Suggests
The new India–France treaty could significantly impact large French portfolio investors as well as companies like Capgemini, Accor, Sanofi, Pernod Ricard, Danone, and L’Oréal — all of which have had a substantial market presence in India in recent years, the report said. Another significant change is that French companies holding a stake of more than 10% in any Indian firm will have to pay 5% on the dividends they receive, instead of 10% earlier.
However, for minority French shareholdings of under 10% in Indian firms, the dividend tax will rise to 15% from 10%, Reuters reported.
Changes to Capital Gains, Services Tax
According to the report, India can impose taxes on any French company’s share sale only when it holds more than 10% of an Indian firm. The new deal removes this clause. The new treaty “will provide for full source-based taxation rights in respect of capital gains on equity shares (in India),” as per the document cited by the report.
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