Press Release, dated 23-02-2026
The Central Board of Direct Taxes (CBDT) has issued a press release regarding amendments to the India–France Double Taxation Avoidance Convention (DTAC). During the recent visit of the President of France to India, the Governments of India and France signed an Amending Protocol to update and strengthen the existing tax treaty framework between the two countries.
1. Taxing Rights on Capital Gains from Shares
The Amending Protocol provides full taxing rights in respect of capital gains arising from the sale of shares to the jurisdiction in which the company whose shares are transferred is a resident.
Accordingly, capital gains from the transfer of shares will be taxable exclusively in the country of residence of the company, providing clarity and certainty in taxation of cross-border share transfers.
2. Deletion of Most-Favoured-Nation (MFN) Clause
The Protocol removes the Most-Favoured-Nation (MFN) Clause from the existing DTAC Protocol.
This deletion resolves all interpretational and implementation issues associated with the MFN clause and simplifies the treaty structure between India and France.
3. Revised Taxation of Dividends
The Amending Protocol revises the taxation framework for dividends by replacing the earlier uniform 10% tax rate with a split-rate structure:
- 5% Tax Rate – Applicable where the beneficial owner holds at least 10% of the capital of the dividend-paying company
- 15% Tax Rate – Applicable in all other cases
This change aligns dividend taxation with prevailing international treaty standards.
4. Modification to Fees for Technical Services (FTS)
The definition of Fees for Technical Services (FTS) has been modified to align with the definition contained in the India–US Double Taxation Avoidance Agreement.
This alignment is expected to enhance consistency in treaty interpretation and reduce disputes relating to the characterisation and taxation of technical service payments.
5. Expansion of Permanent Establishment (PE) Scope
The scope of Permanent Establishment (PE) has been expanded by introducing provisions for Service PE.
This expansion reflects the growing importance of cross-border service activities and ensures appropriate taxation of service-based business operations.
6. Strengthening Exchange of Information and Tax Cooperation
The Amending Protocol updates the provisions relating to Exchange of Information in line with international standards. It also introduces a new Article on Assistance in the Collection of Taxes, which will:
- Facilitate seamless exchange of tax-related information
- Strengthen cooperation between Indian and French tax authorities
- Improve enforcement and recovery of tax claims across jurisdictions
These changes are intended to enhance transparency and administrative cooperation between the two countries.
7. Incorporation of BEPS MLI Provisions
The Protocol incorporates the applicable provisions of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI) into the DTAC.
These provisions had already become applicable following the signing and ratification of the MLI by both India and France. Their incorporation into the treaty ensures alignment with global anti-tax avoidance standards and provides greater clarity in treaty application.
8. Conclusion
The Amending Protocol represents a significant update to the India–France DTAC, aligning it with international tax standards, enhancing certainty in cross-border taxation, strengthening administrative cooperation, and supporting a more transparent and robust tax treaty framework between the two countries.
Click Here To Read The Full Press Release
The post India–France Amend DTAA | Residence Country Gets Capital Gains Tax Rights appeared first on Taxmann Blog.
