India-France Tax Treaty Amended: Dividend Tax Rates Revised, MFN Clause Removed

On February 23, 2026, the Indian finance ministry announced amendments to the 1992 tax treaty with France, removing the most‑favoured‑nation (MFN) clause and altering the dividend tax framework for Indian shareholders, as per Reuters report. 

Key Changes to Dividend Taxation 

The previous flat 10% dividend tax has been replaced by a tiered structure. Shareholders holding at least 10% of a company’s capital will be taxed at 5%, while all other investors face a 15% rate. This split applies to dividend income from Indian companies to both domestic and foreign shareholders. 

Impact on French Parent Companies 

Under the revised treaty, tax on dividends paid by Indian subsidiaries to French parent companies is reduced by half. The amendment effectively lowers the withholding tax from the earlier rate to 5%, aligning with the new 5% bracket for qualifying shareholders. 

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Removal of the Most‑Favoured‑Nation clause 

The treaty no longer contains the most‑favoured‑nation provision, meaning tax benefits will not automatically extend to other treaty partners based on the France agreement. This change gives the government greater flexibility in negotiating future tax treaties. 

Administrative Considerations 

Companies will need to update their dividend distribution processes to reflect the new rates. Tax filings for the fiscal year ending March 31, 2026, must incorporate the revised percentages, and foreign investors should review their withholding tax certificates for accuracy. 

Conclusion 

The amendment to the India‑France tax treaty introduces a two‑tier dividend tax system, removes the MFN clause, and halves the tax on dividends paid to French parent companies. These changes are effective from the date of announcement and will influence dividend taxation for both Indian and foreign shareholders. 

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