India and France Amend Tax Treaty, Adjusting Dividend Tax Rates for Investors

India and France have amended their bilateral tax treaty, which was nearly three decades old. With the amendment, India has decided to reduce the dividend tax for major French investors.

According to the revised provisions published by India's Finance Ministry on Monday, it is expected that investment and trade cooperation between the two countries will further expand once the new arrangement comes into effect.

Under the amended agreement, French investors holding at least a 10 percent stake in Indian companies will now only have to pay 5 percent tax on dividends. Previously, this tax was 10 percent. However, for investors holding less than a 10 percent stake, the dividend tax has been increased from 10 percent to 15 percent.

This change is expected to benefit major French companies such as Sanofi, Renault, and L'Oréal, which are expanding their businesses in India. The new provision also grants Delhi the right to tax capital gains from the sale of some shares, even if the French entity's ownership is less than 10 percent.

The 'Most Favored Nation' (MFN) clause has also been removed from the agreement. Under this clause, OECD member countries could automatically claim the same benefit if India granted a lower rate to any other member. However, in 2023, India's Supreme Court ruled that such benefits are not automatically applicable.

The details of the amendment were made public following a meeting between French President Emmanuel Macron, who visited Delhi last week, and Indian Prime Minister Narendra Modi. Both countries announced their decision to elevate their relationship to a 'Special Global Strategic Partnership.'

According to data cited by Reuters, as of January 2026, foreign portfolio investors based in France hold shares worth approximately $21 billion in Indian companies.

Bilateral trade reached nearly $15 billion last year. According to the expert firm KPMG, the revised agreement is expected to help stabilize the investment climate while securing India's tax base.