India and France have agreed to change their tax agreement that has been in place for thirty years. This change will lower dividend taxes for French investors. At the time India will have more power to tax certain financial deals.
The updated agreement will help French companies like Sanofi, Renault and L’Oréal. All these companies have increased their presence in India in years. Now French firms that own least ten percent of an Indian company will pay a lower dividend tax rate of five percent. Earlier they used to pay ten percent.
However smaller investors will have to pay taxes. French entities that own than ten percent of an Indian company will see their dividend taxes increase from ten percent to fifteen percent.
* A big change in the revised agreement is that it removes a clause.
* This clause allowed French companies to get tax rates in India if India offered better terms to another country in the Organisation for Economic Co-operation and Development (OECD).
The removal of this clause follows a ruling by India’s Supreme Court in 2023. The court said such benefits cannot be applied automatically without government notification.
The changed agreement also gives India power to tax profits from selling shares. This is even if a French investor owns than ten percent of an Indian company. This change strengthens India’s ability to protect its tax base.
The changes will start once all legal and procedural approvals are completed in both countries.
On Monday India’s finance ministry shared details of the amendment. This happened shortly after French President Emmanuel Macron finished his visit to India.
During the visit India and France made their relationship stronger. They called it a “Special Global Strategic Partnership”. They also announced cooperation in areas like defence and space technology.
In a statement on 17 February both governments welcomed the revised tax treaty. They said it would encourage investment and strengthen cooperation between businesses in the two countries.
As of January 2026 French foreign portfolio investors held shares about $21 billion in Indian companies.
The trade between India and France was around $15 billion year.
KPMG, a consultancy firm said the revised treaty brings the tax framework in line, with India’s current treaty policy and international tax standards.
The changes reflect India’s effort to create an investment environment while safeguarding government revenue.
