India and France sign Amending Protocol to update Double Taxation Avoidance Convention (DTAC)

1. At a Glance

Bilateral tax treaty update: India and France signed an Amending Protocol to revise the India-France DTAC of 29 September 1992 [S1][S2].
Aligns the treaty with OECD/G20 BEPS standards (MLI), reallocates capital gains taxing rights, restructures dividend withholding, and deletes the MFN clause that had caused prolonged litigation in India [S1][S2].
UPSC relevance: intersects GS-II (bilateral relations) and GS-III (Indian economy, taxation, BEPS).

Signed on 23 February 2026 during the State Visit of the President of France to India [S1].
Signatories: Ravi Agrawal, Chairperson CBDT (India) and Thierry Mathou, Ambassador of France to India [S1][S2].

1992: Original India-France DTAC signed on 29 September 1992 [S1].
2016: India and France signed the OECD Multilateral Instrument (MLI) to implement BEPS treaty-related measures [S1].
2023 (Steria/Nestlé SA verdict, SC): Supreme Court ruled the MFN clause is not self-operational; requires notification under Section 90 of the Income-tax Act — created the unresolved MFN dispute now being closed via this Protocol [S1][S2].
2026: Amending Protocol signed to modernise the 1992 DTAC [S1][S2].

Instrument: Amending Protocol to the India-France DTAC, 1992 [S1].
Signed on: 23 February 2026 at New Delhi during French Presidential visit [S1].
Indian nodal body: Central Board of Direct Taxes (CBDT) under Department of Revenue, Ministry of Finance [S1].
Enabling Indian law: Section 90 of the Income-tax Act, 1961 (Centre's power to enter DTAAs) [S2].
Capital gains: Full taxing rights on sale of shares of a company vest in the jurisdiction where the company is resident (source-based) [S1][S2].
Dividend tax restructure: replaces uniform 10% with a split rate — 5% if beneficial owner holds ≥10% of capital; 15% in other cases [S2].
MFN clause: Deleted from the Protocol to the DTAC [S1][S2].
BEPS MLI provisions: Explicitly incorporated into the bilateral treaty text [S1][S2].
New article: Assistance in Collection of Taxes (per OECD Model Article 27) [S1][S2].
Exchange of Information (EoI): Updated to current international standards [S1][S2].
Entry into force: After completion of internal ratification procedures in both countries [S1].

Provides tax certainty to French investors; France is among India's top FDI sources (cumulative FDI rank in top 11) [S1].
Source-based capital gains taxation on share sales aligns with India's treaty policy post the 2016 India-Mauritius Protocol and 2017 India-Singapore Protocol [S2].
Reduced 5% dividend rate for substantial shareholders incentivises strategic equity investment over portfolio flows [S2].

Closes the MFN litigation front opened by AO v. Nestlé SA (SC, 2023) which mandated separate Section 90 notification to operationalise MFN benefits [S2].
Treaty operationalisation requires Central Government notification under Section 90(1) of the Income-tax Act, 1961 [S2].

Reinforces the India-France Strategic Partnership (1998) and the Horizon 2047 Roadmap [S1].
Signed during the French President's State Visit, signalling economic deepening beyond defence/space [S1].

New Assistance in Collection of Taxes article gives Indian tax authorities a mechanism to recover tax dues located in France [S1][S2].
Updated EoI strengthens anti-evasion cooperation, consistent with Global Forum on Transparency standards [S1].

23 Feb 2026: Amending Protocol signed in New Delhi [S1][S2].
Follows India's earlier 2024 ratification of MLI changes affecting multiple treaties [S1].
Pursuant to recent CBDT MFN clarification (2022 Circular) and the SC's 2023 Nestlé ruling, the deletion definitively settles the 10.5189% beneficiary-rate dispute on dividends/royalties [S2].

Original India-France DTAC was signed on 29 September 1992 [S1].
Amending Protocol signed on 23 February 2026 [S1].
Signed by Ravi Agrawal (CBDT Chairperson) and Thierry Mathou (Ambassador of France) [S1].
DTAAs in India are notified under Section 90 of the Income-tax Act, 1961 [S2].
Protocol deletes the MFN clause [S1][S2].
Dividend tax: 5% if ≥10% capital holding; 15% otherwise (earlier flat 10%) [S2].
Capital gains on share sale taxable in country of residence of the company (source state) [S1][S2].
Incorporates BEPS MLI (OECD/G20) provisions [S1][S2].
New article on Assistance in Collection of Taxes added (modelled on OECD Model Tax Convention Art. 27) [S1][S2].
Implementing body in India: CBDT, under Department of Revenue, Ministry of Finance [S1].
BEPS stands for Base Erosion and Profit Shifting — an OECD/G20 initiative [S1].
MLI = Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS [S1].

GS-II: India and its bilateral relations — Effect of foreign country policies on India's interests.
GS-III: Indian Economy — Mobilisation of resources; Government Budgeting; Effects of liberalisation on the economy.
Plausible question stems: 1. "Examine how the 2026 India-France DTAC Amending Protocol aligns India's bilateral tax framework with the OECD BEPS architecture." 2. "The deletion of the Most-Favoured-Nation clause from the India-France DTAC marks a maturing of India's tax-treaty policy. Discuss." 3. "Source-based taxation of capital gains on share transfers has become India's preferred treaty position. Critically evaluate."

OECD/G20 BEPS Project & Multilateral Instrument (MLI) — parent framework for the Protocol.
India-Mauritius Protocol (2016) & India-Singapore Protocol (2017) — comparable source-based capital gains shifts.
Section 90 / 90A / 91 of Income-tax Act, 1961 — statutory base for DTAAs and unilateral relief.
Global Minimum Tax (Pillar Two, 15%) — broader international tax reform.
GAAR (General Anti-Avoidance Rules) — domestic anti-abuse companion to treaty measures.
India-France Horizon 2047 / Strategic Partnership — diplomatic context.
Equalisation Levy / Significant Economic Presence — India's unilateral digital tax measures.
Vodafone & Cairn retrospective tax saga — investor-state lessons informing treaty drafting.

DTAC vs DTAA: India-France treaty is officially termed Convention (DTAC), not Agreement — phrasing matters in PIB-sourced MCQs.
Signing ministry: Signed by CBDT (Revenue Dept, MoF), not MEA despite being a bilateral instrument.
MFN clause status: It is deleted, not merely suspended or clarified.
Capital gains rule: Taxing right is with the country of residence of the company whose shares are sold (source), not the country of residence of the seller.
Year confusion: Original DTAC is 1992, not 1969 (which was the India-France Cultural Agreement era).
BEPS ≠ FATCA: BEPS/MLI is an OECD/G20 initiative; FATCA is a US law — do not conflate.

[S1] India and France sign Amending Protocol to update Double Taxation Avoidance Convention (DTAC) — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2231751 — (tier: 1)
[S2] Governments of India and France sign the Amending Protocol to amend the India-France Double Taxation Avoidance Convention — https://www.incometaxindia.gov.in/documents/d/guest/governments-of-india-and-france-sign-the-amending-protocol-to-amend-the-india-france-double-taxation-avoidance-convention-1 — (tier: 1)