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16-12-2025
Bureau Report + Agencies
NEW DELHI/ PARIS: NEW DELHI: India and France have struck a deal to revise their 1992 treaty which will halve the tax on dividends paid by Indian units to French parents, potentially saving millions for companies with major operations in the South Asian nation, documents show.
In return, India will get to widen its powers to tax share sales by French investors, and revoke the “most favored nation” status of France that gave it certain tax advantages, according to confidential Indian government documents reviewed by media.
Bilateral trade between India and France stood at $15 billion last year, and Indian Prime Minister Narendra Modi and French President Emmanuel Macron have been forging warmer ties. The two sides have been working to recast their tax treaty since 2024 to modernize it by adapting global standards on tax transparency.
“The proposed amending protocol will boost flow of investment, technology and personnel between India and France, and will provide tax certainty,” said one of the Indian government documents from August.
The new treaty could have implications for large French portfolio investors as well as companies like Capgemini, opens new tab, Accor, opens new tab, Sanofi, opens new tab, Pernod Ricard, opens new tab, Danone, opens new tab and L’Oreal, opens new tab, all of which have expanded their presence in India in recent years.
A key change is that French companies which hold a stake of more than 10% in any Indian entity will have to pay a 5% tax on the dividends they receive, instead of 10% earlier.
For minority French shareholdings of under 10% in Indian companies, however, dividend tax will rise from 10% to 15%.
Many French firms’ Indian units like Capgemini Technology Services India, BNP Paribas Securities India and TotalEnergies Marketing India have declared dividends in the past, their Indian regulatory disclosures show. The Capgemini, opens new tab unit’s dividend stood at $500 million in 2023-24.
France’s tax office said it could not comment for this story given the negotiations are ongoing, while the finance ministry did not respond to media’s queries.
India’s foreign and finance ministries also did not respond.
Capgemini and Danone declined to comment while the other French companies did not respond to media’s queries.
Currently, India can impose taxes on any French entity’s share sale, but only when it holds more than 10% of an Indian company. The new proposed treaty will remove that threshold.
The new treaty “will provide for full source-based taxation rights in respect of capital gains on equity shares (in India),” said the Indian documents.
France-based foreign portfolio investors (FPIs) own $21 billion worth of shares in Indian companies as of November 2025, a third higher than levels in 2024; Indian share depository data shows and more than 40 French companies hold stakes of under 10% in Indian entities, according to an analysis by Indian market intelligence platform Tracxn.
“This will impact French FPIs in India and also French companies holding minority interest in Indian companies. These investments were not subject to tax under the current treaty,” said Riaz Thingna, a partner at Grant Thornton Bharat LLP.
One official familiar with the deliberations told Reuters on condition of anonymity that Indian and French officials have agreed the terms of the new treaty, which will likely be signed in the coming weeks.
