India and France signed an Amending Protocol to their 1992 Double Taxation Avoidance Convention on 23rd February 2026. For corporate groups with French shareholders or Indian companies investing into France, the changes warrant a fresh look at existing treaty positions.
End of the Most-Favoured-Nation Dispute
The Protocol resolves a long-standing source of dispute. The Most-Favoured-Nation clause, which had reached the Supreme Court and required separate government notification to operate, has been removed entirely. This ends an interpretational issue that had unsettled withholding tax treatment for several years.
Restructured Dividend Rates
On dividends, the existing flat rate of 10 percent has been replaced with a two-tier structure. A 5 percent rate applies where the recipient holds at least 10 percent of the company's capital, and 15 percent in all other cases. The rationalisation is meaningful for both inbound French investment into Indian subsidiaries and outbound dividend flows from French operations of Indian groups.
Capital Gains Move to the Source Country
Capital gains on the sale of shares now sit fully with the source country, regardless of the size of the holding. The earlier portfolio exemption for French residents on Indian share sales has been removed. Indian groups holding French entities should examine the reciprocal treatment in their structures.
FTS Definition and Service PE
Two further changes are worth noting. The definition of Fees for Technical Services has been narrowed and aligned with the language of the India-United States treaty, which is more precise and judicially well-tested. A Service Permanent Establishment clause has also been introduced, meaning that services rendered in India beyond agreed thresholds will trigger source-country taxation of attributable profits.
The Protocol takes effect once both countries complete their internal ratification processes. Groups with cross-border arrangements covered by this treaty should review their withholding positions, intercompany service agreements, and capital gains exposure well before the changes formally come into force.