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India and France have revised a three-decade-old tax treaty, reducing dividend levies for large French investors while expanding Delhi’s powers to tax some transactions.
The changes could benefit major companies such as Sanofi, Renault and L’Oreal, which have expanded their investments in India over the past few years.
The agreement also gives Delhi the right to tax capital gains arising from the sale of shares, including transactions where a French entity owns less than 10% of an Indian company.
The revised treaty also removes a most-favoured-nation (MFN) clause which had allowed French entities to claim a lower tax rate in India.
It will come into effect after completing formalities and legal approvals in both countries.
The details of the amended treaty were released by India’s finance ministry on Monday, days after French President Emmanuel Macron visited India.
During the visit, the countries announced the elevation of their relationship to a “Special Global Strategic Partnership” and deepened cooperation in areas such as defence and space technology.
In a joint statement on 17 February, they welcomed the amendment to the bilateral tax treaty. They said it would “secure economic activity for French and Indian businesses and pave the way for greater investments and collaborations between the two countries”.
As of January 2026, France-based foreign portfolio investors held shares worth $21bn (£15.6bn) in Indian companies, according to data cited by Reuters news agency.
Bilateral trade between India and France stood at $15bn last year.
Under the new rules, French companies holding at least a 10% stake in an Indian company will have to pay 5% tax on dividends – down from 10% earlier.
However, the tax on dividends for French investors holding less than 10% in an Indian company would rise from 10% to 15%.
The removal of the MFN clause is in line with a 2023 judgement by India’s Supreme Court.
BBC
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