India to France Withholding Tax Rates Under DTAA
When Indian companies make cross-border payments to French residents, withholding tax (WHT) must be deducted at source under Section 195 of the Income Tax Act. The India-France DTAA provides reduced withholding rates compared to domestic law, resulting in significant tax savings for French recipients.
Under Indian domestic law, payments of dividends, interest, royalties, and fees for technical services to non-residents attract a base withholding rate of 20% (with surcharge and cess, the effective rate reaches 20.8%-21.84%). The DTAA caps most categories at 10%, with no additional surcharge or cess. The 2026 Amending Protocol will further modify dividend rates once ratified by both countries.
This page provides an authoritative rate reference for all income categories, the documentation needed to claim treaty rates, and practical compliance guidance for Indian payers and French recipients.
Dividend Withholding Rates
Dividends paid by an Indian company to a French shareholder are governed by Article 11 of the India-France DTAA. The applicable rates are evolving due to the 2026 Amending Protocol:
| Category | Current DTAA Rate | 2026 Protocol Rate | Domestic Rate | Conditions |
|---|---|---|---|---|
| Substantial holding (10%+) | 10% | 5% | 20% | Company directly holding 10%+ of capital |
| Portfolio (below 10%) | 10% | 15% | 20% | Holding less than 10% of capital |
Current Position
Under the existing treaty, all dividends are subject to a uniform 10% withholding rate regardless of the shareholding percentage. This rate is half the domestic rate and provides meaningful savings, particularly for large institutional investors.
After 2026 Protocol Ratification
The February 2026 Amending Protocol introduces a differentiated structure. French companies with strategic holdings of 10% or more will benefit from a reduced 5% rate, encouraging long-term FDI. However, portfolio investors with holdings below 10% will face an increased 15% rate. This represents a deliberate policy shift to reward substantive investment while increasing tax on short-term or passive portfolio holdings.
MFN Clause Deleted
The protocol formally removes the Most Favoured Nation clause. Even before this deletion, the Supreme Court's October 2023 ruling had blocked further MFN-based claims (such as the 5% dividend rate sought via India's later treaties with OECD-joining countries) by requiring a specific government notification under Section 90(1). India's notification for France (S.O. 650(E) of July 2000) covered only the existing 10% rates, and no notification was ever issued for those additional benefits.
Interest Withholding Rates
Interest payments from India to France are governed by Article 12:
| Category | DTAA Rate | Domestic Rate | Conditions | Article |
|---|---|---|---|---|
| General interest | 10% | 20% | Paid to beneficial owner resident in France | Article 12(2) |
| Government / Central Bank | 0% (Exempt) | 20% | Paid to French Government, political subdivision, or Banque de France | Article 12(3) |
The 10% rate applies to interest on loans, bonds, debentures, and other debt instruments. This is particularly relevant for French banks such as BNP Paribas, Societe Generale, and Credit Agricole, which actively lend to Indian corporates. Interest connected to a permanent establishment in India is taxed as business profits under Article 7, not under the interest article.
The 2026 Protocol does not modify the interest rates, so the 10% general rate and 0% government rate remain unchanged.
Royalty and FTS Withholding Rates
Article 13 of the India-France DTAA covers both royalties and fees for technical services:
| Category | DTAA Rate | Domestic Rate | Conditions | Article |
|---|---|---|---|---|
| Royalties | 10% | 20% | Copyright, patent, trademark, design, formula, or process | Article 13(2) |
| Fees for Technical Services | 10% | 20% | Managerial, technical, or consultancy services | Article 13(2) |
| Equipment rental | 10% | 20% | Payments for use of industrial, commercial, or scientific equipment | Article 13(2) |
Impact of the 2026 Protocol on FTS
The 2026 Protocol narrows the FTS definition to align with the India-US DTAA. Under the revised scope, only fees involving the transfer of technical know-how ("make available" test) will qualify as FTS taxable at source. General advisory, consultancy, and management services that do not involve knowledge transfer may be reclassified as business profits, taxable in India only if a PE exists.
This is a significant change for French consulting firms, IT service providers, and engineering companies providing services to Indian clients. Until the Protocol is ratified, the broader current FTS definition continues to apply.
Capital Gains Treatment
While capital gains are not subject to withholding in the traditional sense, they have important implications for French investors exiting Indian investments:
Current Treaty (Article 14)
- Immovable property: Gains taxable in India where property is situated
- PE assets: Gains from movable PE property taxable in India
- Shares (10%+ holding): Capital gains on shares of Indian companies taxable in India if the French seller held 10% or more
- Portfolio shares (below 10%): Gains are taxable only in France under Article 14(6), but only where the company is not land-rich. Shares of a company whose property consists directly or indirectly principally of immovable property situated in India remain taxable in India under Article 14(4), whatever the holding percentage
- Other property: Taxable only in France
Under 2026 Protocol
India gains the right to tax capital gains from share transfers regardless of holding percentage. This removes the portfolio exemption, meaning French portfolio investors (including FPIs and venture capital firms) will be subject to Indian capital gains tax on exits from Indian stocks. This change will have significant implications for French institutional investors and must be factored into investment return calculations.
How to Apply Reduced Rates
Tax Residency Certificate (TRC)
The French recipient must obtain a Tax Residency Certificate from the Direction Generale des Finances Publiques confirming fiscal residence in France. This is the foundational document and must be valid for the relevant Indian financial year (April to March).
Form 10F
Complete Form 10F providing the Numero d'Identification Fiscale (NIF), status (individual/company), nationality, period of fiscal domicile, and address in France. This form supplements the TRC and is filed with the Indian payer.
Beneficial Ownership and No-PE Declaration
Submit self-declarations confirming beneficial ownership of the income and that it is not connected to a PE in India. Without these, the Indian payer must withhold at 20%.
Lower Withholding Certificate (Section 197)
If the French recipient's actual Indian tax liability will be lower than the 10% treaty rate (due to expenses, losses, or other deductions), an application can be filed under Section 197 for a lower or nil withholding certificate.
Form 15CA and 15CB Compliance
The Indian payer must file Form 15CA (online undertaking) and obtain Form 15CB (Chartered Accountant certificate) before remittance. For payments exceeding INR 5 lakh, Form 15CB is mandatory. The CA verifies the applicable rate, treaty article, TRC validity, and calculates the correct withholding amount.
Domestic Rates vs Treaty Rates Comparison
| Income Type | Domestic Rate (effective) | Treaty Rate | Annual Savings on INR 1 Cr Payment |
|---|---|---|---|
| Dividends | 20.8% - 21.84% | 10% | INR 10.8L - 11.84L |
| Interest | 20.8% - 21.84% | 10% | INR 10.8L - 11.84L |
| Interest (Govt) | 20.8% - 21.84% | 0% | INR 20.8L - 21.84L |
| Royalties | 20.8% - 21.84% | 10% | INR 10.8L - 11.84L |
| FTS | 20.8% - 21.84% | 10% | INR 10.8L - 11.84L |
Under treaty rates, surcharge and health and education cess are not levied additionally. This is a settled position in Indian tax jurisprudence, making the effective saving per transaction even greater than the headline rate difference.
Common Mistakes and Compliance Tips
Mistake 1: Applying 2026 Protocol Rates Before Ratification
The 2026 Amending Protocol signed on February 23, 2026, is not yet in effect. Indian companies should not apply the new 5%/15% dividend rates or the narrowed FTS definition until both India and France complete internal ratification. Until then, the uniform 10% rate applies to all income categories.
Mistake 2: Not Updating TRC Annually
A TRC issued for one financial year is not valid for the next. French recipients must obtain a fresh TRC from the Direction Generale des Finances Publiques for each Indian financial year (April 1 to March 31) in which they seek treaty benefits.
Mistake 3: Misclassifying Income Types
The boundary between royalties, FTS, and business profits is often disputed. Payments for software licenses, management fees, and technical support services require careful classification. Misclassification can lead to incorrect withholding rates and subsequent tax demands with interest and penalties.
Mistake 4: Ignoring the New Capital Gains Provisions
Once the 2026 Protocol is ratified, French portfolio investors selling Indian shares will face Indian capital gains tax regardless of holding percentage. Investment managers should plan exits and restructure holdings before the Protocol takes effect to optimize tax outcomes.
Mistake 5: Inadequate PE Analysis
The 2026 Protocol introduces a Service PE clause. French companies sending employees to India for project work should evaluate whether their activities could trigger a PE under the new provision. A PE determination would shift the entire profit to Indian taxation rather than just the withholding rate.
For expert support on India-France cross-border tax compliance, including treaty benefit claims, transfer pricing documentation, and FEMA regulatory compliance, contact Beacon Filing's specialized international tax team.
Frequently Asked Questions
What is the current withholding tax rate on dividends from India to France?
The current rate is a uniform 10% under the existing treaty. Once the 2026 Amending Protocol is ratified, it will change to 5% for companies holding 10% or more of the Indian company's capital, and 15% for holdings below 10%.
Are the 2026 Protocol rates applicable now?
No. The 2026 Amending Protocol signed on February 23, 2026, is not yet in force. It takes effect only after India and France exchange notifications confirming that each has completed its internal procedures. On the French side that procedure may involve its Parliament; on the Indian side there is no parliamentary ratification, as the Protocol is given effect domestically by a CBDT notification under Section 90(1) of the Income Tax Act. Until then, the 10% rates that apply across dividends, interest, royalties and FTS are the MFN rates imported into the treaty by CBDT Notification S.O. 650(E) dated 10 July 2000 (effective 1 April 1997), not the rates in the original 1992 convention.
What documents are needed to claim DTAA benefits on interest payments?
A Tax Residency Certificate from the French tax authorities, Form 10F self-declaration, beneficial ownership declaration, and no-PE declaration. The Indian payer must file Form 15CA and 15CB before making the remittance.
How does the treaty affect French banks lending to Indian companies?
French banks benefit from a reduced 10% withholding rate on interest income from Indian borrowers, compared to the domestic rate of 20% plus surcharge and cess. Interest paid to the Banque de France or French government entities is fully exempt (0% rate).
Will French portfolio investors pay Indian capital gains tax after the 2026 Protocol?
Yes. The 2026 Protocol removes the portfolio exemption, granting India the right to tax capital gains on share transfers regardless of the holding percentage. This will affect French FPIs, mutual funds, and venture capital firms exiting Indian investments.
What happens if the Indian payer withholds at the wrong rate?
If the Indian payer withholds at a rate lower than applicable (e.g., applies treaty rate without proper documentation), they can be treated as an assessee in default under Section 201(1). Interest at 1% per month (non-deduction) or 1.5% per month (non-payment) applies. If they withhold at a higher rate, the French recipient can claim a refund by filing an Indian tax return.
This article is for general information only and is not legal, tax, or investment advice. Confirm current rules with the relevant authority or a qualified professional — or ask our team. See our full disclaimer.
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Tax Advisory for Foreign Investors in IndiaFrance — 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 paying company's capital; reduces to 5% once 2026 Protocol is ratified | 10% (5% under 2026 Protocol, pending ratification) | 20% | Article 11(2) |
| Portfolio (below 10%) Beneficial owner holds less than 10% of the capital; increases to 15% 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 India paid to a beneficial owner resident in France | 10% | 20% | Article 12(2) |
| Government / Central Bank Interest paid to the Government, political subdivision, local authority, or Banque de France | 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; 2026 Protocol narrows scope to transfer of technical know-how | 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 not connected with a PE; narrowed definition under 2026 Protocol | 10% | 20% | Article 13(2) |