India and France Sign Protocol to Revise Double Taxation Agreement, Strengthen Cross-Border Tax Cooperation
New Delhi, February 23, 2026:
India and France have signed an Amending Protocol to revise their existing Double Taxation Avoidance Convention (DTAC), marking an important step towards strengthening economic cooperation and modernising the tax framework between the two countries. The agreement aims to bring greater clarity to international taxation, improve the exchange of financial information and create a more predictable environment for businesses and investors operating across both jurisdictions.
The protocol was signed during the recent visit of the President of France to India. Representing the two governments, Ravi Agrawal, Chairperson of the Central Board of Direct Taxes (CBDT), signed the agreement on behalf of India, while Thierry Mathou, Ambassador of France to India, signed on behalf of the French Republic.
The amendments update the India-France Double Taxation Avoidance Convention, which was originally signed on September 29, 1992. The revised framework is intended to reflect developments in international taxation and address several important issues relating to the taxation of cross-border investments, dividends, technical services and business operations.
Changes to Capital Gains Taxation
One of the key provisions of the Amending Protocol concerns capital gains arising from the sale of shares in a company. Under the revised arrangement, the country in which the company is resident will have full taxing rights over such capital gains.
This change is intended to clarify the allocation of taxing rights between India and France and provide a clearer framework for investors undertaking cross-border transactions. Greater certainty over the applicable tax jurisdiction can help businesses and investors assess their tax obligations when buying or selling shares in companies based in either country.
Revised Tax Rates on Dividend Income
The protocol also introduces changes to the taxation of dividend income by replacing the existing single tax rate of 10% with a two-tier structure.
Under the revised arrangement, a 5% tax rate will apply to qualifying shareholders holding at least 10% of the company’s capital, while a 15% rate will apply in other cases, subject to the applicable treaty conditions.
The revised structure distinguishes between substantial shareholdings and other investments, bringing a more differentiated approach to dividend taxation under the agreement.
Changes to Technical Services and Permanent Establishment
Another significant amendment relates to the definition of “Fees for Technical Services.” The revised definition will be aligned with the corresponding provision in the India-US Double Taxation Avoidance Agreement, helping bring greater consistency to the treatment of certain cross-border technical service payments.
The protocol also expands the definition of “Permanent Establishment” by introducing the concept of a Service Permanent Establishment, commonly referred to as a Service PE. This change addresses circumstances involving the provision of services across borders and may affect how business profits are taxed when enterprises operate in the other country under the applicable treaty provisions.
These revisions are intended to update the agreement in line with evolving international tax practices and provide clearer rules for businesses supplying services or conducting commercial activities across India and France.
Most-Favoured-Nation Clause Removed
The Amending Protocol also removes the Most-Favoured-Nation (MFN) Clause from the protocol to the existing India-France tax convention. According to the official announcement, this change is intended to bring closure to issues associated with the interpretation and application of the clause.
The removal is expected to provide greater clarity regarding the treaty’s provisions and reduce uncertainty surrounding the application of certain tax benefits.
Stronger Exchange of Information and Tax Recovery Cooperation
In addition to changes affecting investments and business taxation, the protocol updates provisions governing the exchange of information between the two countries. It also introduces a new article on assistance in the collection of taxes.
These measures are designed to strengthen cooperation between the tax authorities of India and France, facilitate the exchange of relevant tax information and support the collection of taxes in accordance with the agreed framework. The updates also bring the convention in line with international standards aimed at improving transparency and cooperation in tax matters.
The revised agreement incorporates the applicable provisions of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, commonly known as the BEPS Multilateral Instrument (MLI). These provisions had already become applicable following the signing and ratification of the instrument by India and France.
The inclusion of these measures strengthens the treaty’s alignment with international efforts to address tax avoidance and ensure that tax rules are applied more effectively to cross-border economic activities.
Implementation of the Amending Protocol
The changes introduced through the protocol will take effect after both countries complete their respective internal legal procedures and in accordance with the terms agreed upon between them. The revised provisions will therefore become applicable subject to the completion of the required formalities in India and France.
The updated convention is expected to offer greater tax certainty to individuals, investors and businesses with financial or commercial interests in both countries. Clearer rules governing capital gains, dividends, technical services and permanent establishments can help taxpayers better understand their obligations and plan their cross-border activities.
Overall, the agreement represents an important development in India-France economic relations. By modernising the existing tax convention and strengthening cooperation between the two tax administrations, both countries aim to support investment, encourage the movement of technology and personnel, and reinforce their broader economic partnership.
News Source: Central Board of Direct Taxes (CBDT) – Official Press Release
