India and France Amend Double Taxation Avoidance Convention

Date of Protocol: 24 February 2026
Treaty Amended: India‑France Double Taxation Avoidance Convention (DTAC) of 1992
Major Changes:
Capital Gains Taxation: Full taxing rights to the residence country of the company whose shares are sold.
Dividend Taxation: Split rate – 5% for shareholders holding ≥10% of capital, 15% for others (replaces flat 10%).
MFN Clause: Deleted from the DTAC.
Fees for Technical Services (FTS): Definition aligned with India‑US DTA.
Permanent Establishment (PE): Scope expanded to include Service PE.
Tax Cooperation: Updated exchange of information and added assistance in tax collection per international standards.
BEPS Alignment: Incorporation of the Multilateral Instrument (MLI) provisions.

The original DTAC (1992) was designed to avoid double taxation and prevent fiscal evasion between India and France.
Global concerns over Base Erosion and Profit Shifting (BEPS) prompted the OECD to develop the MLI, which many countries, including India and France, have ratified.
Updating DTAC ensures that bilateral tax treaty stays contemporary with international best practices and supports the India‑France Special Global Strategic Partnership.

Investment Promotion: Clearer tax rules and reduced uncertainty encourage French investors to channel capital into Indian markets and vice‑versa.
Revenue Assurance: By granting taxing rights to the residence country for capital gains, India can better capture tax on Indian‑resident shareholders.
Fiscal Discipline: Deleting the MFN clause removes the possibility of invoking more favourable treaty provisions from third‑party agreements, simplifying administration.
BEPS Compliance: Aligning with the MLI helps India meet OECD standards, reducing opportunities for profit shifting and protecting the tax base.
Enhanced Cooperation: New provisions on information exchange and tax collection assistance strengthen bilateral fiscal collaboration.

Article 246 of the Constitution (Distribution of Legislative Powers) – taxation powers of the Union.
Income Tax Act, 1961 – provisions on capital gains, dividend taxation, and definition of Permanent Establishment.
India‑France DTAC (1992) & its Amendment Protocol (2026) – treaty law governing cross‑border taxation.
BEPS Multilateral Instrument (MLI) – international treaty amendment mechanism adopted under the OECD framework.

Understanding treaty‑level tax reforms is essential for GS Paper‑2 (Polity & Governance) (tax policy, international agreements) and GS Paper‑3 (Economy & Development) (foreign investment, fiscal stability).
The amendment illustrates how India integrates global standards (BEPS) into bilateral treaties, a recurring theme in questions on International Relations and Economic Diplomacy.