India and France seal a renewal of the treaty that grants dividend relief to Paris and tax rights to Delhi

India and France have reached an agreement to revise their 1992 treaty that will halve the tax on dividends paid by Indian units to French parents, potentially saving millions for companies with major operations in the South Asian nation, documents show.

In exchange, India will be able to expand its powers to tax share sales by French investors and revoke France's “most favored nation” status that gave it certain tax advantages, according to confidential Indian government documents reviewed by Reuters.

Bilateral trade between India and France amounted to $15 billion last year, and Indian Prime Minister Narendra Modi and French President Emmanuel Macron have been forging warmer ties. The two sides have been working to reformulate their tax treaty since 2024 to modernize it by adapting global standards on tax transparency.

“The proposed amendment protocol will boost the flow of investment, technology and personnel between India and France, and provide fiscal certainty,” said one of the Indian government documents from August. The new treaty could have implications for large French portfolio investors, as well as companies such as Capgemini, Accor, Sanofi, Pernod Ricard, Danone and L'Oreal, all of which have expanded their presence in India in recent years.

A key change is that French companies that have a stake of more than 10% in any Indian entity will have to pay a 5% tax on dividends they receive, instead of the previous 10%. However, for French minority stakes of less than 10% in Indian companies, the dividend tax will increase from 10% to 15%.

Many Indian units of French companies such as Capgemini Technology Services India, BNP Paribas Securities India and TotalEnergies Marketing India have declared dividends in the past, their Indian regulatory disclosures show. The Capgemini unit's dividend stood at $500 million in 2023-24.

France's tax office said it could not comment on this story as negotiations are ongoing, while the Finance Ministry did not respond to questions from Reuters. India's foreign affairs and finance ministries also did not respond. Capgemini and Danone declined to comment, while the other French companies did not respond to questions from Reuters.

Currently, India can impose taxes on the sale of shares in any French entity, but “only when it owns more than 10% of an Indian company.” The proposed new treaty will eliminate that threshold.

The new treaty “will establish full source-based taxing rights with respect to capital gains on shares (in India),” according to the Indian documents.

France-based foreign portfolio investors (FPIs) own shares of Indian companies worth $21 billion as of November 2025, a third more than 2024 levels, data from Indian stock depositories shows.
And more than 40 French companies have stakes of less than 10% in Indian entities, according to an analysis by Indian market intelligence platform Tracxn.

“This will affect French FPIs in India and also French companies that have minority interests in Indian companies. These investments were not subject to tax under the current treaty,” said Riaz Thingna, partner at Grant Thornton Bharat LLP.

An official familiar with the deliberations told Reuters on condition of anonymity that Indian and French officials had agreed on the terms of the new treaty, which is likely to be signed in the coming weeks. In New Delhi, the deal is subject to final approval by Prime Minister Narendra Modi's cabinet, according to the documents. Reuters is the first to report on the planned changes to the treaty between India and France.

India also accepted France's demand to limit the tax on fees for technical services to cases where a French supplier transfers technical know-how, removing most routine consulting and support services from the scope of India's tax. “This can help French companies that provide services such as design consulting, cybersecurity and market research,” Thingna said.

Differences over how to interpret the so-called most favored nation, or MFN, clause were among the main reasons for the renegotiation, the official said. If a country has an MFN clause with India under a signed treaty, it typically starts claiming lower tax rates if New Delhi achieves more favorable tax terms later with another OECD nation. But a landmark decision by India's Supreme Court in late 2023 said countries cannot automatically start doing so, raising concerns in France.

“This decision caused a sharp deterioration in the legal and economic security of French companies in India. The possible additional fiscal cost was estimated at 10 billion euros for existing contracts alone,” the official said.

India and France have reached the decision to remove from their treaty the MFN clause that historically had only benefited France, according to Indian government documents. It was about ending disagreements over its interpretation that have led to “fiscal uncertainty and protracted litigation,” according to a document. In January, Switzerland also suspended the application of the MFN clause of its treaty with India citing the Supreme Court ruling.