India and France are moving closer to finalising amendments to their decades-old Double Taxation Avoidance Convention (DTAC), introducing significant changes aimed at modernising tax treatment for cross-border investments. The revised framework proposes to eliminate the Most Favoured Nation (MFN) clause and introduce updated dividend taxation norms to create a more balanced and transparent taxation structure.

Key Highlights

• India and France revise tax treaty, abolishing MFN clause and easing dividend taxation rules.
• Move aims to boost cross-border investment, enhance clarity, and strengthen bilateral economic cooperation.

Under the proposed revisions, dividend payments made by Indian subsidiaries to their French parent companies are expected to attract a lower withholding tax. This move is seen as a major step towards improving India’s investment appeal and encouraging stronger capital flows from French corporations. The streamlined tax structure is also expected to bring clarity and predictability, which are key considerations for multinational investors.

In exchange for these benefits, France will forego certain tax advantages previously available under the MFN clause. This adjustment reflects India’s broader strategy to rationalise its tax treaties and align them with evolving international taxation standards. The updated agreement is expected to reduce ambiguities, prevent treaty abuse, and promote fair taxation practices.

The revised DTAC is part of India’s ongoing efforts to modernise its global tax treaties and foster stable, long-term economic partnerships. Officials believe that the amendments will not only strengthen bilateral trade and investment ties but also create a more equitable framework for businesses operating across both jurisdictions.

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Once formalised, the revised tax treaty is expected to enhance investor confidence and support deeper economic cooperation between India and France.