India, France Revise Tax Treaty, Easing Dividend Levies for Major Investors
India has updated its three-decade-old tax treaty with France, introducing changes that will reduce dividend taxes for large French investors while expanding New Delhi’s authority to tax certain transactions. Under the revised agreement, French companies holding at least 10% in an Indian firm will now pay a reduced dividend tax of 5%, down from the previous 10%. However, minority shareholdings below 10% will face a higher rate of 15%, up from 10%, potentially affecting smaller portfolio investors.
The new pact also grants India the right to tax capital gains arising from share sales by French entities, even when their stake in an Indian company is under 10%. This provision could impact France-based foreign portfolio investors, who held about $21 billion worth of Indian equities as of January 2026. Major French corporations with significant operations in India — including Capgemini, Accor, Sanofi, Pernod Ricard, Danone and L’Oréal — are expected to be among those influenced by the revised rules.
Additionally, the agreement removes the “most-favoured-nation” (MFN) clause following a 2023 Indian Supreme Court ruling that rejected automatic claims to lower tax rates granted to other OECD nations. The clause’s removal aims to reduce legal ambiguity that had strained interpretations between the two countries. The update comes amid strengthening bilateral ties, with trade between India and France reaching $15 billion last year and new defence cooperation announced during French President Emmanuel Macron’s recent visit to India.
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