India-France DTAC Protocol Signed: Key tax changes explained
New Delhi: The Government of India and the Government of the French Republic have formally signed a Protocol to modify the existing India-France Double Taxation Avoidance Convention (DTAC), the Ministry of Finance announced Monday, Feb. 23, 2026.
The agreement, which updates the original convention signed on Sept. 29, 1992, was finalised during the French President’s recent visit to India. Signatories included Mr Ravi Agrawal, Chairperson of the Central Board of Direct Taxes, and Mr Thierry Mathou, France's Ambassador to India.
Revised Taxing Rights and Clauses
The Amending Protocol introduces structural shifts in how cross-border assets are taxed between the two nations:
- Capital Gains: The jurisdiction where a company is resident now holds full taxing rights regarding capital gains stemming from the sale of that company's shares.
- Dividend Taxation: The previous flat rate has been replaced with a tiered system: a 5% tax rate applies to those holding at least 10% of capital, while a 15% rate applies to all other cases.
- MFN Clause: Officials have deleted the "Most-Favoured-Nation (MFN) Clause" from the DTAC Protocol, effectively settling all issues tied to the provision.
- Technical Services: The definition of 'Fees for Technical Services' has been adjusted to align with the India-US Double Taxation Avoidance Agreement.
- Permanent Establishment: The scope of a 'Permanent Establishment' has been broadened through the addition of 'Service PE'.
International Compliance and Cooperation
Beyond direct taxation, the Protocol modernises administrative cooperation to meet current global benchmarks. It updates language regarding the "Exchange of Information" and introduces a new article dedicated to "Assistance in Collection of Taxes".
The agreement further incorporates relevant provisions of the BEPS Multilateral Instrument (MLI), which both India and France had previously ratified.
Economic Outlook
According to the CBDT, the updates seek to balance the interests of both nations while offering "greater tax certainty to the taxpayers". The government expects these changes to stimulate the exchange of investment, technology, and personnel, thereby reinforcing the bilateral economic bond.
The modified terms will enter into force once both countries complete their respective internal legal procedures.