India–France tax treaty overhaul cuts dividend levies for major investors
India and France have signed a significant revision to their three‑decade‑old tax treaty, reducing dividend taxes for large French investors while expanding New Delhi’s authority to tax certain transactions. The move is expected to benefit French multinationals with deep investments in India, including Sanofi, Renault, and L’Oréal.
Under the revised rules, French companies holding at least a 10% stake in an Indian firm will see their dividend tax rate halved from 10% to 5%. Smaller investors, however, will face higher costs, with the rate rising from 10% to 15% for holdings below the 10% threshold.
The treaty also grants India the right to tax capital gains from the sale of shares, even when French entities own less than 10% of an Indian company. In addition, the agreement eliminates the most‑favoured‑nation (MFN) clause, which had previously allowed French investors to claim lower rates if India offered better terms to other OECD members.
The removal of the MFN clause aligns with a 2023 Supreme Court ruling that such benefits cannot be applied automatically and require formal notification. India’s finance ministry described the revised treaty as a realignment with its current tax policy and international standards. Global consultancy KPMG noted that the changes “underscore India’s efforts to safeguard its tax base and promote a stable investment environment.”
The announcement came just days after French President Emmanuel Macron’s visit to India, during which both countries elevated their relationship to a “Special Global Strategic Partnership.” Cooperation in defence, space technology, and trade featured prominently in the talks. In a joint statement on February 17, leaders welcomed the treaty amendment, saying it would “secure economic activity for French and Indian businesses and pave the way for greater investments and collaborations between the two countries.”
France‑based foreign portfolio investors held shares worth $21 billion (£15.6bn) in Indian companies as of January 2026, according to Reuters. Bilateral trade between the two nations stood at $15 billion last year, underscoring the scale of economic ties.
By lowering dividend taxes for major investors while tightening rules for smaller holdings, the treaty reflects India’s dual priorities: attracting long‑term strategic investment while protecting its tax revenues.
Source: BBC
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