India and France have signed a comprehensive protocol updating their 1992 tax treaty, introducing split dividend tax rates of 5% and 15%, eliminating the contentious Most-Favoured-Nation clause, and strengthening cross-border tax cooperation to enhance bilateral investment flows and economic partnership.
India’s Central Board of Direct Taxes issued a press release on 23 February 2026, announcing that an amending protocol to the 1992 France–India income and capital tax treaty was signed on 17 February 2026.
The protocol introduces significant changes to capital gains taxation, granting complete taxing rights on share sales to the country where the company resides. The controversial Most-Favoured-Nation Clause has been removed entirely, resolving longstanding disputes.
Dividend taxation now follows a dual-rate structure: 5% tax for shareholders holding at least 10% capital, and 15% for others—replacing the previous uniform 10% rate. The definition of “Fees for Technical Services” now mirrors the India-US tax agreement, while “Permanent Establishment” expands to include Service PE.
The protocol modernises information exchange provisions and adds a new Article on tax collection assistance, aligning with international standards. This facilitates smoother cooperation between Indian and French tax authorities. BEPS Multilateral Instrument provisions, already ratified by both countries, are now formally integrated into the convention.
The changes introduced through the amending protocol shall enter into effect subsequent to the completion of internal procedures under the laws of both countries and subject to the terms agreed between the two countries.
