{India-France Tax Treaty Deal on Dividends}
- New Delhi: india and France are nearing a finalized agreement to revise their 1992 tax treaty, potentially reducing dividend taxes for French companies and altering capital gains tax...
- The draft agreement,according to officials,is "yet to be finalised" and requires cabinet approval.
- The primary aim of the revision is to lower the dividend withholding tax.
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India and France Near Tax Treaty Revision to Lower Dividend Taxes
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New Delhi: india and France are nearing a finalized agreement to revise their 1992 tax treaty, potentially reducing dividend taxes for French companies and altering capital gains tax exemptions. Negotiations, which began in 2023, have been primarily stalled by disagreements over the Most Favored Nation (MFN) clause.
Updated December 12,2025,23:46:43
Key Details of the Proposed Treaty Revision
The draft agreement,according to officials,is “yet to be finalised” and requires cabinet approval. An official, speaking on condition of anonymity, stated that the treaty has undergone “multiple revisions” and cautioned against premature commentary, noting that a final agreement hasn’t been reached by either side, including resolution of the Most Favored Nation (MFN) clause.
The primary aim of the revision is to lower the dividend withholding tax. Currently, a 15% dividend withholding tax, coupled with capital gains taxes on equity shares, may reduce after-tax yields for investors holding less than 10% equity in a company.Suresh swamy,a partner at Price Waterhouse & Co LLP,suggests that lowering these taxes could improve returns for investors.
Impact on Investors and Companies
The revised treaty is expected to notably benefit French parent companies with investments in India. Reducing the dividend withholding tax will increase the net returns on their investments.Though,the changes to capital gains tax exemptions could affect the profitability of share sales.
The delay in finalizing the treaty, stemming from disagreements over the MFN clause, highlights the complexities of international tax negotiations. The MFN clause typically ensures that a country extends the same tax benefits to all its treaty partners. The specific sticking points regarding the MFN clause in this negotiation haven’t been publicly disclosed.
Historical Context: The 1992 Tax Treaty
The existing tax treaty between India and france, signed in 1992, aimed to prevent double taxation and promote economic cooperation. Over the years, changes in both countries’ tax laws and international tax standards have necessitated a review of the treaty. The current revision seeks to address these changes and create a more favorable investment climate.