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India will amend its 30-year-old tax treaty with France, saving main French firms hundreds of thousands of {dollars} in dividends and increasing New Delhi’s powers to tax sure transactions, the Finance Ministry stated on Monday.
Below the brand new guidelines, French firms with at the least 10% stake in Indian firms can pay a 5% tax on dividends, down from 10% beforehand. Nevertheless, for French minority shareholders of lower than 10% in Indian firms, the dividend tax will increase from 10% to fifteen%. Reuters first reported particulars of the tax treaty, anticipated in December.
The brand new tax treaty is prone to have an effect on massive buyers in French portfolios in addition to firms comparable to Capgemini, Accor, Sanofi, Pernod Ricard, Danone and L’Oréal, which have expanded their presence in India in recent times.
The revised settlement additionally provides India the proper to tax capital positive aspects and the proper to tax the sale of shares in French firms even when India owns lower than 10% of the shares within the Indian firm.
The transfer may influence France-based overseas portfolio buyers, who held $21 billion value of shares in Indian firms as of January 2026, in keeping with information from India’s share depository.
The so-called most-favored-nation (MFN) clause may also be repealed following a landmark ruling by India’s Supreme Courtroom in late 2023 that noticed disagreement over the way to interpret it.
If a rustic has a most-favoured-nation clause with India below a treaty, that nation will sometimes begin claiming decrease tax charges if New Delhi later indicators extra favorable tax phrases with different OECD nations. Nevertheless, the Supreme Courtroom dominated that nations can not mechanically begin doing so, creating tax uncertainty. This situation turned one of many major drivers of renegotiations, and nations finally agreed to take away the clause. Bilateral commerce between India and France reached $15 billion final 12 months. Throughout French President Emmanuel Macron’s go to to India final week, the 2 nations introduced protection cooperation to collectively produce Rafale fighter jets and helicopters.
