In a significant step towards deepening bilateral economic cooperation, the Government of India and the Government of the French Republic have signed an amending protocol to update the India–France Double Taxation Avoidance Convention (DTAC). The development was announced in a press release issued by the Ministry of Finance on February 23, 2026.
The protocol was signed during the recent visit of the French President to India, marking a major milestone in tax cooperation between the two nations.
Signing Ceremony and Key Representatives
The Amending Protocol was signed by Mr. Ravi Agrawal, Chairperson of the Central Board of Direct Taxes (CBDT), on behalf of India, and Mr. Thierry Mathou, Ambassador of France to India, representing the French Republic.
The original India–France DTAC was signed on September 29, 1992. The newly signed protocol modernises the treaty framework in line with evolving international tax standards.
Full Taxing Rights on Capital Gains
One of the most notable changes introduced through the protocol is the allocation of full taxing rights over capital gains arising from the sale of shares to the country where the company is resident. This provision is expected to reduce ambiguity and potential disputes over cross-border share transfers.
The protocol also removes the Most-Favoured-Nation (MFN) clause from the treaty framework, settling long-standing interpretational issues that had led to litigation and uncertainty.
Revised Dividend Taxation Structure
The Amending Protocol restructures dividend taxation by replacing the earlier uniform 10% tax rate with a differentiated regime:
- 5% tax rate for beneficial owners holding at least 10% of capital.
- 15% tax rate in all other cases.
This move aligns the treaty more closely with global standards and provides clarity for cross-border investors.
Changes to Fees for Technical Services and Permanent Establishment
The definition of “Fees for Technical Services” (FTS) has been aligned with the language used in India’s tax treaty with the United States, bringing conceptual consistency to treaty interpretation.
Additionally, the scope of “Permanent Establishment” (PE) has been expanded to include a “Service PE” provision. This inclusion is likely to have implications for cross-border service providers operating between the two jurisdictions.
Strengthened Information Exchange and Tax Recovery
The protocol updates provisions relating to the Exchange of Information and introduces a new article on Assistance in Collection of Taxes, consistent with international best practices.
These measures are aimed at enhancing transparency, curbing tax evasion, and strengthening administrative cooperation between the two countries.
Further, the amendments incorporate applicable provisions of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI), which had already become operational following ratification by both countries.
Entry into Force and Economic Impact
The amendments will enter into force after completion of domestic legal procedures in both countries and subject to mutually agreed terms.
According to the Finance Ministry, the updated treaty framework balances the interests of both nations while bringing the DTAC in line with contemporary international standards. The changes are expected to provide greater tax certainty to businesses and investors, facilitate smoother cross-border investments, and strengthen economic ties between India and France.
The protocol signals a renewed commitment by both governments to transparent taxation, investor confidence, and robust bilateral cooperation in an increasingly interconnected global economy.
