Overview of the India-France DTAA
The Double Taxation Avoidance Agreement (DTAA) between India and France, officially known as the Convention between the Government of the Republic of India and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, is a cornerstone bilateral tax treaty governing cross-border taxation between these two major economies.
The treaty covers withholding tax on dividends, interest, royalties, and fees for technical services, along with provisions on business profits, capital gains, employment income, and other categories. For French companies operating in India, Indian businesses with French operations, and individuals earning income across both countries, the DTAA provides the framework for determining which country has the right to tax specific types of income and at what rate.
France is one of India's largest European trading partners and a significant source of foreign direct investment. The treaty facilitates bilateral investment by providing certainty on tax treatment and reducing the overall tax burden on cross-border transactions. The agreement contains 31 articles and applies to Indian income tax (including surcharge), French income tax, company tax, and social contribution taxes.
Treaty History and Current Status
The India-France DTAA was signed on September 29, 1992, in Paris and came into force on August 1, 1994. The treaty was executed in Hindi, French, and English.
2026 Amending Protocol
On February 23, 2026, India and France signed a significant Amending Protocol to the DTAA, representing the most comprehensive revision since the treaty's inception. The key changes include:
- Dividend rates restructured: Reduced from 10% to 5% for holdings of 10% or more; increased to 15% for portfolio holdings below 10%
- Capital gains expanded: India granted full taxing rights on capital gains from share sales regardless of holding percentage, removing the earlier 10% ownership threshold
- MFN clause deleted: The Most Favoured Nation clause has been formally removed from the treaty protocol
- FTS definition narrowed: Fees for technical services scope aligned with the India-US DTAA, restricting taxation to cases involving transfer of technical know-how
- Service PE added: A new Service PE provision expands permanent establishment exposure for French service providers in India
- MLI provisions incorporated: BEPS Multilateral Instrument provisions already applicable have been directly incorporated into the treaty text
- Exchange of Information updated: Enhanced information exchange provisions and a new article on Assistance in Collection of Taxes added
The Amending Protocol will become effective after ratification by both Indian and French parliaments. Until ratification is complete, the original 1992 treaty rates continue to apply.
MLI Impact
Both India and France signed and ratified the Multilateral Instrument (MLI). The MLI introduced the Principal Purpose Test (PPT) and updated mutual agreement provisions. The 2026 Amending Protocol formally incorporates these MLI provisions into the treaty text, ensuring they remain part of the amended treaty going forward.
Supreme Court MFN Ruling (October 2023)
The Supreme Court's October 2023 ruling in Assessing Officer v. Nestle SA directly impacted the India-France DTAA. The MFN clause in the protocol had been invoked by French residents to claim lower rates based on India's treaties with other OECD countries. The SC held that a Section 90(1) notification is mandatory for MFN benefits, effectively denying lower rates through MFN. The 2026 Protocol has now formally deleted the MFN clause, eliminating future ambiguity.
Key Treaty Articles
Business Profits (Article 7)
Business profits of a French enterprise are taxable in India only if the enterprise carries on business through a permanent establishment in India. Profits attributable to the PE are computed on an arm's length basis, treating the PE as an independent enterprise engaged in similar activities under similar conditions.
Dividends (Article 11)
Under the current treaty, dividends paid by an Indian company to a French beneficial owner are capped at 10% of the gross amount. Once the 2026 Protocol is ratified, the rate will become 5% for companies holding at least 10% of the paying company's capital, and 15% for other cases. This restructuring rewards long-term, substantive foreign direct investment while increasing the rate for short-term portfolio holdings.
Interest (Article 12)
Interest arising in India and paid to a French resident is capped at 10% of the gross amount, compared to the domestic rate of 20%. Interest paid to the French government, local authorities, or the Banque de France is exempt. Interest connected to a PE in India is taxed under the business profits article instead.
Royalties and FTS (Article 13)
Both royalties and fees for technical services are capped at 10% of the gross amount. Royalties cover payments for copyrights, patents, trademarks, designs, plans, secret formulae, or processes. Fees for technical services include managerial, technical, and consultancy services. Under the 2026 Protocol, the FTS definition is narrowed to align with the India-US DTAA, restricting it to cases involving the transfer of technical know-how.
Capital Gains (Article 14)
The current treaty provides:
- Immovable property: Taxable in the country where the property is situated
- PE movable property: Taxable in the PE country upon alienation of the PE
- Ships and aircraft: Taxable only in the country of effective management
- Shares (10%+ holding): Under the current treaty, capital gains on shares where the French seller held 10% or more can be taxed in India
- Other property: Taxable only in the seller's country of residence
Under the 2026 Protocol, India will have the right to tax capital gains from share transfers regardless of the percentage of holding, eliminating the portfolio exemption. This is a significant change that will affect French portfolio investors exiting Indian investments.
Withholding Tax Rates Summary
| Income Type | Current DTAA Rate | 2026 Protocol Rate | Domestic Rate | Article |
|---|---|---|---|---|
| Dividends (10%+ holding) | 10% | 5% | 20% | Article 11 |
| Dividends (portfolio) | 10% | 15% | 20% | Article 11 |
| Interest (general) | 10% | 10% | 20% | Article 12 |
| Interest (govt/CB) | 0% | 0% | 20% | Article 12 |
| Royalties | 10% | 10% | 20% | Article 13 |
| FTS | 10% | 10% | 20% | Article 13 |
Note: The 2026 Protocol rates apply only after ratification by both countries. Until then, the current rates remain in effect. Domestic rates of 20% are base rates; effective rates with surcharge and cess range from 20.8% to 21.84%.
Permanent Establishment Rules
Article 5 of the India-France DTAA defines a permanent establishment as a fixed place of business through which an enterprise carries on its activities. The treaty specifically includes:
- Fixed place PE: Place of management, branch, office, factory, workshop, mine, oil or gas well, quarry, or other extraction site
- Construction PE: Building site, construction, or installation project lasting more than 6 months
- Service PE: Exploration activities lasting more than 183 days; the 2026 Protocol adds a broader service PE clause for French service providers
Excluded activities include storage or display of goods, maintaining stock for processing by another enterprise, purchasing goods or collecting information, advertising, scientific research, and other preparatory or auxiliary activities. A dependent agent who habitually concludes contracts can create an agency PE.
Tax Residency and Certificate Requirements
To claim treaty benefits, a Tax Residency Certificate (TRC) from the French tax authorities (Direction Generale des Finances Publiques) is mandatory. Additionally, the French resident must provide:
- Form 10F: Self-declaration with details including tax identification number, residential status, nationality, and the period of residency
- No PE Declaration: Confirmation that the income is not attributable to a PE in India
- Beneficial Ownership Declaration: Proof that the recipient is the beneficial owner of the income, not merely an agent or conduit
Without these documents, the Indian payer must withhold tax at the higher domestic rate under Section 195. The TRC must be valid for the relevant financial year.
Mutual Agreement Procedure (MAP)
The India-France DTAA includes a Mutual Agreement Procedure allowing residents to present cases of taxation not in accordance with the treaty to the competent authority of their state of residence. The competent authorities shall endeavor to resolve the case by mutual agreement within a reasonable timeframe.
The MAP process is particularly useful for resolving transfer pricing disputes, PE profit attribution issues, and cases of dual residency. India's competent authority is the Joint Secretary (FT&TR), CBDT, while France's competent authority operates through the Direction Generale des Finances Publiques.
How to Claim Treaty Benefits
Step 1: Obtain a Tax Residency Certificate
Request a TRC from the French tax administration confirming tax residency in France for the relevant financial year. This is the foundational document for claiming treaty benefits in India.
Step 2: Complete Form 10F
Fill out Form 10F providing your tax identification number (NIF), status, nationality, address, and the period of fiscal domicile. This form is submitted alongside the TRC to the Indian payer.
Step 3: Submit Declarations
Provide beneficial ownership and no-PE declarations to the Indian company making the payment. These self-declarations are critical for the Indian payer to apply the reduced treaty rate.
Step 4: Indian Payer Files Form 15CA/15CB
The Indian company must file Form 15CA and 15CB with the Income Tax Department before remitting the payment. Form 15CB requires certification by a Chartered Accountant verifying the applicable treaty rate and the documentation received.
Step 5: Claim Double Taxation Relief
The French resident can claim credit for Indian taxes paid against their French tax liability under Section 90 of the Indian Income Tax Act and corresponding French domestic law provisions. The credit method is the primary mechanism for eliminating double taxation under this treaty.
For assistance with India-France cross-border tax structuring, tax advisory, transfer pricing, and FEMA/RBI compliance, reach out to Beacon Filing's international tax specialists.
Frequently Asked Questions
What are the current dividend withholding rates under the India-France DTAA?
The current rate is 10% for all dividends. Once the 2026 Amending Protocol is ratified by both parliaments, the rate will change to 5% for French companies holding at least 10% of the Indian company's capital, and 15% for portfolio investors holding less than 10%.
Has the MFN clause been removed from the India-France DTAA?
Yes. The 2026 Amending Protocol formally deleted the MFN clause from the treaty protocol. Even before this, the Supreme Court's October 2023 ruling had effectively rendered the MFN clause inoperable by requiring a Section 90(1) notification that was never issued.
How does the 2026 Protocol affect capital gains on share sales?
The 2026 Protocol grants India full taxing rights on capital gains from share transfers regardless of the French investor's holding percentage. Previously, only holdings of 10% or more could be taxed in India. This eliminates the portfolio exemption and affects both strategic and financial investors.
What is the Service PE clause added by the 2026 Protocol?
The 2026 Protocol introduces a Service PE provision that creates permanent establishment exposure for French service providers working in India beyond specified thresholds. This means French companies providing services in India through their employees may trigger PE status even without a fixed place of business.
What is the withholding tax rate on royalties?
Royalties are capped at 10% under both the current treaty and the 2026 Protocol. The domestic Indian rate is 20% (plus surcharge and cess), so the treaty provides significant savings. The 10% rate applies to payments for patents, copyrights, trademarks, and other intellectual property.
How does the narrowed FTS definition affect French companies?
Under the 2026 Protocol, the FTS definition is aligned with the India-US DTAA, restricting taxation to cases involving the actual transfer of technical know-how. General consultancy and advisory services that do not involve such transfer may fall outside the FTS scope, potentially being classified as business profits taxable only if a PE exists in India.
When will the 2026 Amending Protocol take effect?
The 2026 Protocol will take effect after completion of internal ratification procedures by both India and France. Until ratification, the original 1992 treaty rates and provisions continue to apply. There is no fixed timeline, but ratification typically takes 6-18 months.
France — Dividend Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| Substantial holding (10%+) Beneficial owner is a company directly holding at least 10% of the capital of the paying company; 5% rate applies once 2026 protocol is ratified | 10% (5% under 2026 Protocol, pending ratification) | 20% | Article 11(2) |
| General (portfolio) Beneficial owner holds less than 10% of the capital; 15% rate applies once 2026 protocol is ratified | 10% (15% under 2026 Protocol, pending ratification) | 20% | Article 11(2) |
France — Interest Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Interest arising in one state and paid to a resident of the other state who is the beneficial owner | 10% | 20% | Article 12(2) |
| Government / Central Bank Interest paid to the Government, political subdivision, or central bank (Banque de France) of the other state | 0% | 20% | Article 12(3) |
France — Royalty Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| Royalties (general) Payments for use of copyright, patent, trademark, design, model, plan, secret formula or process | 10% | 20% | Article 13(2) |
| Fees for Technical Services Payments for managerial, technical, or consultancy services; scope narrowed under 2026 protocol to align with India-US DTAA definition | 10% | 20% | Article 13(2) |
France — FTS Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General FTS Fees for technical services; definition narrowed under 2026 protocol to require transfer of technical know-how | 10% | 20% | Article 13(2) |