Published by Global Banking & Finance Review®
Posted on February 23, 2026
2 min readLast updated: April 2, 2026
Add as preferred source on GoogleIndia amended its tax treaty with France, scrapping the MFN clause and restructuring dividend taxes. Rates are 5% for shareholders with 10%+ stakes and 15% for others, replacing the prior flat 10% levy.
By Nikunj Ohri and Aditya Kalra
NEW DELHI, Feb 23 (Reuters) - India has revised its three‑decade‑old tax treaty with France, which will help major French companies save millions of dollars in dividend levies, while it also broadens New Delhi's powers to tax certain transactions, the finance ministry said on Monday.
Under the new rules, French companies holding at least 10% in an Indian entity will pay a 5% tax on dividends, down from 10% earlier. For minority French shareholdings of under 10% in Indian companies, however, dividend tax will rise from 10% to 15%.
Reuters was first to report the details of the planned tax treaty in December.
The new tax treaty would likely have implications for large French portfolio investors, as well as companies like Capgemini, Accor, Sanofi, Pernod Ricard, Danone and L'Oreal -- all of which have expanded their presence in India in recent years.
The revised pact also gives India the right to tax capital gains, and impose taxes on any French entity's share sale, even when it holds less than 10% of an Indian company.
The move could impact France-based foreign portfolio investors that owned $21 billion worth of shares in Indian companies as of January 2026, according to Indian share depository data.
It also scraps the so-called most‑favoured‑nation (MFN) clause following a landmark Indian Supreme Court decision in late 2023 that led to disagreements on how to interpret the clause.
If a country has an MFN clause with India under a treaty, it would typically start claiming lower tax rates if New Delhi strikes more favourable tax terms later with another OECD nation.
The Supreme Court, however, ruled that countries can't automatically start doing so, creating tax uncertainty. The issue became one of the main drivers of the renegotiation and the countries ultimately agreed to delete the provision.
Bilateral trade between India and France stood at $15 billion last year. During French President Emmanuel Macron's India visit last week, the two countries announced a defence cooperation to jointly produce Rafale fighter jets, as well as helicopters.
(Reporting by Nikunj Ohri, edititng by Andrei Khalip)
India has amended its tax treaty with France, deleting the MFN clause and revising dividend withholding rates to a two‑tier structure.
Dividends are taxed at 5% for shareholders holding at least 10% of a company’s capital and at 15% for other investors, replacing the previous 10% flat rate.
Authorities aimed to eliminate ambiguity and recurring disputes over MFN interpretations, providing clearer rules and greater tax certainty for cross‑border dividends.
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