A treaty being significantly overhauled in 2026
The original India-France Double Taxation Avoidance Convention (DTAC) was signed on 29 September
1992. In February 2026, during French President Emmanuel Macron's visit to India, the two countries
signed a major Amending Protocol -- signed by CBDT Chairperson Ravi Agrawal and French Ambassador Thierry
Mathou -- that materially changes the treaty's structure. The flat 10% dividend withholding rate is
replaced with a split structure: 5% for shareholders holding at least 10% of the paying company's
capital, and 15% for all other investors. India gains full taxing rights on capital gains from share
sales, removing the prior rule that only applied where the seller held more than 10% of shares. The
fees-for-technical-services definition is realigned with the India-US DTAA, and a Service Permanent
Establishment concept is added. Most notably, the treaty's Most-Favoured-Nation (MFN) clause is deleted
entirely -- resolving the same interpretive uncertainty the Supreme Court of India's 19 October 2023
Nestle SA ruling flagged for MFN clauses generally, an issue this platform has also covered for the
Netherlands. As of this writing the Protocol awaits the mutual ratification notifications required for
entry into force, so NRIs in France should confirm the current, applicable rates before relying on either
the old or new structure for a specific transaction.
NRI residential status -- the same rules regardless of country
Whether someone is treated as a Resident, Non-Resident, or Resident but Not Ordinarily Resident (RNOR)
under Indian tax law depends on the standard day-count tests under the Income-tax Act, applied the same
way regardless of whether the person is based in France or any other country. Only income that is
received in India, accrues in India, or arises from an Indian source is generally taxable for a genuine
Non-Resident; foreign-sourced income earned and received in France is not taxable in India for a
non-resident.
TDS on Indian-source income and DTAA relief
Payments to a non-resident from an Indian source -- rent, interest, or capital gains on Indian assets,
for example -- are generally subject to withholding (TDS) under Section 195 of the Income-tax Act at the
applicable rate. Where the India-France DTAC (in whichever version is then applicable) provides a lower
rate for a specific income category, an NRI can claim that relief by furnishing a Tax Residency
Certificate issued by the French tax authorities along with the prescribed Form 10F.
Common mistakes made in this area:
- Relying on the old flat 10% dividend rate once the 2026 Amending Protocol enters into force,
rather than the new split 5%/15% structure.
- Assuming the MFN clause still applies after its deletion by the 2026 Protocol.
- Not obtaining a Tax Residency Certificate before claiming DTAA relief on Indian-source
income.
