The India-France Tax Treaty Overhaul: Navigating the New 15% Dividend Hit

What happened? India and France just completely overhauled their 1992 Double Taxation Avoidance Convention (DTAC) by signing a new Amending Protocol. The update brings major structural changes: it scraps the contentious Most-Favoured-Nation (MFN) clause, gives full taxing rights on capital gains to the country where the company resides, and revamps dividend taxes. Instead of a flat 10% tax rate on dividends, there is now a split rate—5% for entities holding at least a 10% stake in the company, and 15% for everyone else.

How does this impact the retail investor? If you hold direct equity in French companies, this translates to a direct, albeit slight, hit to your dividend yields. Since everyday retail investors virtually never hold a 10% or greater stake in large foreign multinationals, your dividend tax withholding under this treaty is jumping from 10% to 15%. On a broader scale, however, this provides much-needed clarity. By aligning “Fees for Technical Services” with the India-US agreement and deleting the MFN clause, the government is wiping out years of legal ambiguity. It makes cross-border taxation much cleaner, even if the dividend tax gets a bit steeper for the individual investor.

What should the investor do next? Audit your international portfolio for direct French equity exposure. If you rely on those dividends, you need to recalculate your net yield projections using the new 15% rate. Because these changes won’t kick in until both countries finish their internal legal procedures, you have a brief window to prepare. Bring this up with your Chartered Accountant (CA) during your next tax planning session to figure out exactly how this higher withholding rate will impact your Foreign Tax Credit (FTC) claims in India.

Amit Sharma

As the Lead Analyst at Invest With Bull, Amit Sharma bridges the gap between complex banking regulations and your wallet. With a core focus on Credit Card Arbitrage and BDA Real Estate, Amit provides the data-backed analysis that salaried professionals need to maximize returns and minimize interest. He is dedicated to building financial literacy through unbiased, actionable research.

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