India–France Double Taxation Avoidance Convention

India and France signed an Amending Protocol (23 February 2026) to update the India–France Double Taxation Avoidance Convention (1992) in line with global tax standards.

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Key Updates to India–France Double Taxation Avoidance Convention (1992)

• Revised Capital Gains Taxation: The Protocol grants full taxing rights on capital gains from the sale of shares to the country where the company is a tax resident.
• Removal of MFN Clause: The Most-Favoured-Nation clause has been deleted, resolving interpretational disputes and enhancing treaty clarity.
  • The Most-Favoured-Nation (MFN) clause is a foundational principle in international trade and treaty law, requiring countries to treat all trading partners equally.
• Modified Dividend Tax Structure: The earlier uniform 10% rate is replaced with a split rate—5% for shareholders holding at least 10% equity and 15% in other cases.
• Alignment with Global Standards: It revises the definition of Fees for Technical Services (aligned with the India–US DTAA)
  • It expands the scope of Permanent Establishment (including Service PE), strengthens Exchange of Information provisions, introduces Assistance in Collection of Taxes, and incorporates BEPS Multilateral Instrument provisions.
    • Base Erosion and Profit Shifting (BEPS) refers to tax artificially shifting profits to low or no-tax locations where there is little or no economic activity, thereby eroding the tax base of higher-tax jurisdictions

About Double Taxation

• Double taxation occurs when the same income is taxed in two countries, typically the source country and the country of residence.
• Impact on Trade and Investment: It increases tax burden, discourages cross-border trade, restricts capital mobility, and reduces investor confidence.

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Significance of DTAC

• Enhancing Tax Certainty: Clearer provisions reduce disputes and improve predictability for businesses and investors.
• Strengthening Economic Cooperation: Updated norms promote investment, technology transfer, and mobility of professionals between India and France.

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