India-France Tax Treaty Amended, Dividend Tax Cut

• India cut dividend tax to 5% for major French investors but raised it to 15% for smaller holdings
• The treaty expands India’s right to tax capital gains on share sales
• The MFN clause was removed following a Supreme Court ruling

India has updated its tax treaty with France, which has been in effect for three decades, by implementing major changes to how dividends and capital gains taxes will be assessed, according to the finance ministry.

The India France tax treaty amendment under the India France DTAA update revises the double taxation avoidance agreement India France, delivering a dividend tax cut India France and reshaping dividend taxation India France to provide foreign investors tax relief India.

The move strengthens the India France economic partnership, boosts cross-border investment India France, aligns with evolving international tax policy India, reinforces global tax agreements India, and enhances overall investor benefits India France.

The new agreement establishes a 5% dividend tax rate for French companies that own at least 10% of an Indian business, which replaces the previous 10% tax rate. The dividend tax rate will rise from 10% to 15% for investors who own less than 10% of the company.

The new regulations will provide advantages to major French companies that operate extensive businesses in India, which include Capgemini, Accor, Sanofi, Pernod Ricard, Danone and L’Oreal, while also impacting large institutional investors.

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French foreign portfolio investors based in France owned approximately $21 billion of Indian stocks in January 2026, as per depository information. The new rules will affect their tax obligations.

The updated treaty now allows India to tax capital gains from French companies that sell shares of Indian firms in which they own less than 10%. This extended power enables New Delhi to impose taxes on specific international business activities that occur between the two countries.

The agreement eliminates the "most favoured nation" (MFN) clause because the 2023 Supreme Court decision established that such provisions should not be applied automatically whenever India establishes superior tax agreements with other OECD countries. The ruling had created uncertainty and became a central issue in renegotiations, leading both sides to scrap the clause.

The revision comes amid strengthening bilateral ties. Trade between India and France reached $15 billion last year, and recent high-level engagements have expanded cooperation in defence and other strategic sectors.