India and France have modernized their bilateral tax agreement, implementing significant changes that will reshape investment dynamics between the two nations. The revised treaty, which updates terms established three decades ago, reduces dividend taxation for substantial French investors while simultaneously expanding India’s authority to tax certain financial transactions.
Under the new framework, French corporations holding at least 10% stakes in Indian companies will benefit from a reduced dividend tax rate of 5%, a substantial decrease from the previous 10%. Conversely, portfolio investors with smaller holdings (below 10%) will face an increased tax rate of 15% on dividends, up from the former 10% levy.
The agreement represents a strategic recalibration of fiscal relations, particularly through the elimination of the most-favored-nation (MFN) clause that previously permitted French entities to claim lower tax rates if India granted more favorable terms to other OECD members. This modification aligns with a 2023 Supreme Court of India ruling that such benefits cannot be automatically applied without formal notification procedures.
The treaty revision, announced by India’s finance ministry days after President Emmanuel Macron’s diplomatic visit to Delhi, forms part of broader bilateral enhancements. During the meetings, both nations elevated their relationship to a ‘Special Global Strategic Partnership’ and expanded cooperation in defense and space technology sectors.
Prominent French corporations including Sanofi, Renault, and L’Oreal stand to benefit from these changes, having significantly expanded their Indian investments in recent years. The updated agreement aims to stabilize economic activities for businesses from both countries while encouraging increased investment flows and collaborative ventures.
According to financial data, France-based portfolio investors held approximately $21 billion in Indian company shares as of January 2026, with bilateral trade between the nations reaching $15 billion in the previous year. The revised treaty awaits final formalities and legal approvals in both countries before implementation.