India and France have formally revised their three-decade-old tax treaty, cutting dividend taxes for major French investors while expanding New Delhi’s power to tax certain transactions.
The announcement follows last week’s bilateral meeting between Emmanuel Macron and Narendra Modi, during the French president’s visit to Mumbai and Delhi.
Major French Firms Set to Benefit
The revised treaty is expected to particularly help large French companies such as:
- Sanofi
- Renault
- L’Oréal
All three have expanded their investments in India in recent years and will now face lower dividend taxes if they hold significant stakes.
Key Changes in the Revised Treaty
1. Dividend Tax Cuts for Large Investors
French companies that hold at least a 10% stake in an Indian company will now pay a 5% dividend tax, down from 10% earlier.
2. Higher Tax for Smaller Shareholders
French investors with less than 10% ownership will see dividend tax increase from 10% to 15%.
3. New Capital Gains Tax Rights
India now gains the right to tax capital gains from share sales even if a French entity owns less than 10% of an Indian firm.
4. Removal of the MFN Clause
The Most-Favoured-Nation provision—previously allowing French firms to automatically claim lower tax rates given to other OECD members—has been removed.
This aligns with a 2023 ruling by the Supreme Court of India, which clarified that such benefits cannot be applied automatically without government notification.
Strategic Partnership Strengthened
During Macron’s visit, the two countries announced the elevation of ties to a “Special Global Strategic Partnership”, expanding cooperation in:
- Defence
- Space technology
- Economic collaboration
In their joint statement, both sides said the treaty update would secure economic activity for businesses and encourage larger bilateral investments.
Investment Snapshot
According to data cited by Reuters:
- France-based portfolio investors held $21 billion in Indian equities as of January 2026.
- Bilateral trade between India and France reached $15 billion last year.
Expert Reaction
Global consultancy KPMG said the revised treaty:
“Realigns the bilateral tax framework with India’s current treaty policy and international tax standards.”
It added that the update strengthens India’s efforts to protect its tax base while ensuring a stable investment environment.