India and France Advance a Modern Tax Partnership to Boost Investment Confidence

New Delhi – India and France have taken an important step toward refreshing their long-standing economic partnership, sealing a modernised tax treaty that promises stronger investment flows and greater certainty for businesses operating across both nations.

The revised agreement marks a significant upgrade from the 1992 framework, reflecting the evolving needs of global trade and signalling the deepening trust between New Delhi and Paris.

Under the new proposal, French companies operating in India will see their dividend taxes reduced, a move set to ease financial burdens and encourage more long-term capital commitments in the Indian market.

The treaty proposes halving the tax on dividends paid by Indian subsidiaries to French parent firms holding more than 10 percent stakes, dropping the rate from 10 percent to 5 percent.

This shift is expected to unlock millions in savings for major French players that have steadily expanded in India’s fast-growing economy.

For minority French shareholders with holdings under 10 percent, the dividend tax rate will rise from 10 percent to 15 percent, a change designed to balance tax fairness while still keeping India attractive for foreign portfolio investors.

Despite this adjustment, the overall architecture of the treaty is designed to provide stability and predictability, which remain top priorities for global investors.

French companies such as Capgemini, Accor, Danone, Sanofi and L’Oréal have built substantial operations in India, and the new framework aims to support continued collaboration, technology transfer and skill development.

India, in return for lower dividend taxes, will expand its rights to impose taxes on share sales by French investors, ending previous limitations that only applied to stakes above 10 percent.

This change strengthens India’s source-based taxation framework, aligning it with global transparency standards and modern international tax practices.

With French portfolio investors holding more than $21 billion in Indian equities, the update is expected to create clearer rules for capital gains taxation and reduce future ambiguities.

More than 40 French companies currently hold minority stakes in Indian firms, and the upgraded treaty ensures their tax responsibilities are clearly structured and future-ready.

The move comes at a time when India and France are nurturing one of the most resilient bilateral partnerships in the Indo-Pacific, marked by cooperation in defence, clean energy, technology and higher education.

Both nations have emphasised a shared commitment to rules-based international engagement, economic openness and sustainable growth.

The treaty overhaul is also aligned with India’s broader goal of welcoming high-quality foreign investment, strengthening investor sentiment, and creating an environment of transparency and fairness.

Policymakers believe the new agreement will encourage more cross-border movement of professionals, expand the exchange of expertise, and fuel joint innovation projects in emerging sectors.

It also reinforces India’s reputation as a reliable destination for European investment, supported by its stable governance, growing market size and strong economic fundamentals.

For France, the agreement strengthens its strategic foothold in one of the world’s most influential emerging economies, deepening commercial and diplomatic ties in the process.

As negotiations progress toward final approval, both sides have expressed confidence that the treaty revamp will deliver long-term benefits for businesses, investors and workers across both countries.

The partnership reflects a modern, forward-looking vision that is set to shape a more integrated and prosperous economic future for India and France.