India-France Amend Tax Treaty; Capital Gains, Dividend Rules Updated

India and France have signed an Amending Protocol to revise the Double Taxation Avoidance Convention (DTAC) originally concluded on 29 September 1992. As per news reports, the agreement was signed during the visit of Emmanuel Macron to India. 

Ravi Agrawal, Chairperson of the Central Board of Direct Taxes (CBDT), and Thierry Mathou, Ambassador of France to India, signed the Protocol on behalf of their respective governments. The Ministry of Finance issued a notification on 23 February 2026 confirming the development. 

Changes to Capital Gains and Dividends 

Under the revised provisions, capital gains arising from the sale of shares will be taxed in the country where the company is resident. This grants full taxing rights to the source jurisdiction in such cases. 

The Protocol also revises dividend taxation. The earlier uniform rate of 10% has been replaced with a two-rate structure. A 5% tax will apply where the beneficial owner holds at least 10% of the company’s capital, while a 15% rate will apply in other cases. 

Removal of MFN Clause 

The Amending Protocol removes the Most-Favoured-Nation (MFN) clause from the existing treaty framework. The clause had led to interpretational disputes over its applicability in recent years. Its deletion formally addresses these issues within the treaty text. 

Technical Definitions and Permanent Establishment 

The definition of “Fees for Technical Services” has been aligned with the language used in the India-United States tax treaty. The scope of Permanent Establishment has also been expanded to include a Service Permanent Establishment. 

These changes clarify the taxation of cross-border services and business activities carried out through personnel or service arrangements. 

Implementation 

The Protocol updates provisions relating to Exchange of Information and introduces an Article on Assistance in Collection of Taxes, in line with international standards. It also incorporates relevant provisions of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument adopted by both countries. 

The amendments will take effect after completion of internal legal procedures in India and France, in accordance with the agreed terms. 

Read More: Income Tax Department Issues ‘NUDGE’ Notices to High Income Taxpayers Over ITR Mismatches! 

Conclusion  

The amended provisions will take effect after both countries complete their internal legal procedures. Implementation will follow the exchange of formal notifications under the agreed terms. 

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