India France DTAA for Companies with Withholding Rates and MFN

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

The India France DTAA caps Indian tax at 10 percent on payments to a French beneficial owner. The cap covers dividends (Article 11), interest (Article 12), and royalties and technical fees (Article 13). The caps came through the MFN clause in point 7 of the Protocol and S.O. 650(E) of 10 Jul 2000. Since Nestle SA (19 Oct 2023), no further MFN benefit applies without a notification. Each claim needs a French residence certificate and Form 41 under section 159(8) of the Income Tax Act, 2025.

This page is for French parent companies and the finance teams of their Indian subsidiaries. It covers the rates, the MFN clause, technical fees, PE, capital gains, the MLI, documents and a worked example. Our France country guide covers setting up the Indian company. A protocol signed on 18 Feb 2026, after this page first appeared, is covered in its own section near the end. Rupee amounts use Indian grouping, so INR 1,00,00,000 is one crore.

What is the India France DTAA?

The India France DTAA is the income and capital tax convention signed at Paris on 29 Sep 1992. Its Protocol forms part of it. It entered into force on 1 Aug 1994. India notified it by GSR 681(E) of 7 Sep 1994. It decides which country may tax a French company's Indian income, and it caps India's rate on four kinds of payment.

The France treaty numbers its articles differently from the OECD model. Dividends sit in Article 11, interest in Article 12, and royalties and fees for technical services in Article 13. Capital gains sit in Article 14. A Form 146 for a French payee should cite these numbers, not the Article 10 to 13 sequence used in the German or Japanese treaties.

Two later notifications changed the text:

1. S.O. 650(E) of 10 Jul 2000. It applied the MFN clause in point 7 of the Protocol. It cut the caps on dividends, interest, royalties and fees to 10 percent, citing India's later treaties with Germany and the United States.
2. S.O. 2106(E) of 12 Aug 2009. It substituted Article 12(3)(a)(ii). Interest paid to the Reserve Bank of India, the Banque de France or the Agence Française de Développement (AFD) is exempt.

Article 2 covers Indian income tax "including any surcharge thereon". From 1 Apr 2026, section 159 of the Income Tax Act, 2025 gives effect to the treaty. It replaced section 90 of the 1961 Act. Under section 159(4) the Act applies only where it is more beneficial to the taxpayer. Section 159(6) still lets the General Anti Avoidance Rule (GAAR) override the treaty.

What withholding rates apply under the India France DTAA?

India may tax each of the four main payments to a French beneficial owner at up to 10 percent of the gross amount. The dividend cap does not depend on the size of the holding. Interest paid to the French state, the Banque de France, the AFD or on listed export credit loans is exempt.

Income from India	France treaty article	Treaty cap (%)	Condition	Domestic rate for a foreign company, tax year 2026-27, before surcharge and cess (%)	Domestic effective rate in the 2% surcharge slab (%)
Dividends	11(2)	10	Beneficial owner; any size of holding	20, section 207(1)	21.216
Interest from a parent or any other lender	12(2)	10	Beneficial owner	20 on foreign currency loans; 35 on rupee loans	21.216; 37.128
Interest paid to the French Government, the Banque de France or the AFD	12(3)(a)	Exempt	Paid to the listed body	Not applicable	Not applicable
Interest on loans backed by the named French or Indian export credit bodies	12(3)(b)	Exempt	Loan within the listed schemes	Not applicable	Not applicable
Royalties	13(2), 13(3)	10	Beneficial owner	20, section 207(2)	21.216
Payments for the use of industrial, commercial or scientific equipment	13(2), 13(5)	10	Beneficial owner	20, section 207(2)	21.216
Fees for managerial, technical or consultancy services	13(2), 13(4)	10	Beneficial owner; not salary or independent personal services	20, section 207(2)	21.216
Gains on a participation of at least 10 percent in an Indian company	14(5)	No cap	Indian law applies	12.5 long term; 35 short term (unlisted)	13.26; 37.128

Sources: India France DTAA as amended by S.O. 650(E) and S.O. 2106(E); sections 197 and 207 of the Income Tax Act, 2025; Finance Act, 2026, First Schedule.

The Indian payer deducts tax under section 393(2), Table serial 17, at the "rates in force". That is the Finance Act rate or the treaty rate, as applicable. A payer that holds the treaty documents deducts at the lower treaty rate. Our guide to TDS on payments to non residents covers the mechanics.

If the payee is an Australian company instead, our guide to the India Australia DTAA for companies sets out its withholding rates.

Domestic rate against treaty rate

The Income Tax Act, 2025 taxes these items at 20 percent under section 207, plus surcharge and 4 percent cess. A foreign company's surcharge is 2 percent where payments to it exceed INR 1,00,00,000 in the year. It is 5 percent above INR 10,00,00,000. Rupee interest shows the widest gap, at 35 percent at home against 10 percent under the treaty.

We apply the treaty rate flat, without surcharge or cess. Article 2 names Indian income tax "including any surcharge thereon" as a covered tax. Tribunal rulings treat cess the same way, but no CBDT circular settles the point.

The interest exemptions in Article 12(3) cover the French Government, the Banque de France and the AFD. They also cover loans backed by COFACE, the Banque Française du Commerce Extérieur or the Export Import Bank of India.

Each cap has a PE carve out. Articles 11(6), 12(5) and 13(6) remove the cap where the holding, debt or right is effectively connected with an Indian PE. Articles 12(7) and 13(8) limit the cap to an arm's length amount where a special relationship inflates the payment.

How does the MFN clause in the France Protocol work?

Point 7 of the Protocol is a most favoured nation (MFN) clause. It applies if India signs a later treaty with an OECD member after 1 Sep 1989. That treaty must limit Indian tax at source to "a rate lower or a scope more restricted" than the France treaty. France then gets "the same rate or scope". It covers dividends, interest, royalties, fees for technical services and payments for the use of equipment.

The India treaty page lists one notification under the clause. S.O. 650(E) of 10 Jul 2000 recited the India Germany and India US treaties and cut the French caps to 10 percent. That notification set the lower rates and their start dates. It did not import the make available condition that some later treaties attach to technical fees, and the Supreme Court later relied on that omission.

French groups then made two further MFN claims:

1. A 5 percent dividend rate. India's treaties with Slovenia, Lithuania and Colombia carried lower dividend rates. All three countries joined the OECD after signing with India.
2. A narrower fee definition. The India UK treaty taxes a technical fee only if the service makes technical knowledge available. Steria (India) Limited argued that this narrower scope applied to France through point 7.

The Delhi High Court accepted the Steria argument on 28 Jul 2016 in W.P.(C) 4793/2014, reported at [2016] 386 ITR 390. It held that the Protocol formed part of the treaty and needed no separate notification. The CBDT disagreed in Circular No. 3/2022 of 3 Feb 2022. The revenue appealed against the Steria judgment, and the Supreme Court heard that appeal with Nestle SA.

What did the Supreme Court decide in Nestle SA?

In Assessing Officer Circle (International Taxation) v. Nestle SA, 2023 INSC 928, the Supreme Court decided appeals on the Netherlands, France and Switzerland treaties on 19 Oct 2023. The France appeal was the revenue's challenge to the Steria judgment. The Court held that an MFN benefit applies only after India issues a notification. It also held that the third state must be an OECD member when it signs its treaty with India.

Question	Delhi High Court position	Supreme Court holding, 19 Oct 2023
Does an MFN benefit apply without a notification?	Yes, the Protocol is part of the treaty (Steria, 2016)	No; rights arise only once a notification issues under section 90(1) of the 1961 Act (para 46)
When must the third state be an OECD member?	When the benefit is claimed	When it enters into its treaty with India (para 51)
Do Slovenia, Lithuania and Colombia trigger the clause?	Yes	No; none was an OECD member when it signed with India (para 49)
Did S.O. 650(E) import the make available test for France?	Yes, through the MFN clause (Steria)	No; the condition was omitted from the notification, and the revenue's argument against automatic benefits "has merit" (paras 59 and 60)

Source: Supreme Court of India, Nestle SA, 2023 INSC 928.

The ruling has three effects for a French group today:

1. Dividends stay at 10 percent. No notification imports a 5 percent rate.
2. Technical fees keep the wide French definition. Without a notification, the make available test does not apply to the France treaty. On our reading, Steria's reasoning does not survive the notification rule in Nestle.
3. Past claims are exposed. A shareholder that claimed 5 percent, or a payer that withheld nothing on a management fee, faces correction with interest. The reassessment time limits decide how far back.

Section 536 of the Income Tax Act, 2025 keeps earlier circulars and notifications alive where they are consistent with the new Act. So S.O. 650(E) still applies, and Circular No. 3/2022 still states the CBDT view. On our reading, section 159(1) now carries the notification requirement that section 90(1) did. Our case note on MFN clauses after the Nestle ruling sets out the full reasoning, and our India Netherlands guide covers the Dutch side.

What counts as fees for technical services under the France treaty?

Article 13(4) defines fees for technical services as "payments of any kind to any person" in consideration for services "of a managerial, technical or consultancy nature". It excludes payments to the payer's own employees and to individuals for independent personal services under Article 15. There is no make available test in the treaty text.

So most services a French parent charges its Indian subsidiary fall inside Article 13 at 10 percent. Group management fees, IT support, engineering and quality audits all qualify. Brand, patent and know how licences are royalties under Article 13(3), and equipment hire falls under Article 13(5). The salary of a seconded French employee falls under Article 16 instead.

Section 9(7) of the Income Tax Act, 2025 covers "managerial, technical or consultancy services" at home. The treaty does not narrow that scope today. It only lowers the rate from 20 percent plus surcharge and cess to a flat 10 percent.

The Supreme Court ruled in Engineering Analysis Centre of Excellence Private Limited on 2 Mar 2021. It held that end user software licences are not royalty under India's treaties. Section 9(6) of the 2025 Act still treats software as royalty at home. For a French vendor, support bundled with a licence is usually a technical fee at 10 percent anyway, so we split the contract price first.

When does a French company have a PE in India?

A French company has a permanent establishment (PE) in India if it has a fixed place of business here. A building site or a construction, assembly or installation project lasting more than six months also counts. So does a dependent agent who habitually concludes contracts. The treaty text has no service PE clause.

PE trigger	Article	Threshold	Typical risk for a French parent
Fixed place of business: place of management, branch, office, factory, workshop, mine, warehouse, sales outlet	5(1), 5(2)	No day count in the text	Parent staff using an Indian office as their own
Installation or structure for exploring natural resources	5(2)	More than 183 days	Energy projects
Building site, construction, assembly or installation project	5(3)	More than six months	Plant set up for the Indian subsidiary
Dependent agent with authority to conclude contracts, or who holds and delivers stock	5(5), with MLI Article 12	Habitual exercise; the MLI adds the principal role test	Indian staff negotiating deals the parent signs
Independent agent	5(6), with MLI Article 12	Not a PE if acting in the ordinary course on arm's length terms	Unrelated distributor
Preparatory or auxiliary activity	5(4), with MLI Article 13(4)	Not a PE, unless group activities form a cohesive business	Liaison or buying office
Subsidiary	5(7)	Control alone is not a PE	Holds while the subsidiary acts for itself

Sources: India France DTAA, Article 5; consolidated text of the convention as modified by the MLI on impots.gouv.fr.

No service PE today

The France treaty has no paragraph that creates a PE from staff days alone. Visiting French staff create a PE only through a fixed place at their disposal, a long project or an agent. Because Article 13 already taxes service fees at 10 percent, the PE question matters mostly for projects and sales models.

A PE moves connected royalties and fees out of Article 13 and into Article 7 under Article 13(6). India then taxes the attributable profit at 35 percent, plus surcharge and cess, through a return. Point 3 of the Protocol bases PE profit on the activity actually carried on in India, including for construction and installation contracts. Our guide on how to avoid permanent establishment risk covers the controls.

How are capital gains taxed under the India France DTAA?

Under Article 14(5), India may tax a French company's gain on Indian shares only where they represent a participation of at least 10 percent. Below that, Article 14(6) leaves the gain to France alone. Article 14(4) adds a rule for shares in companies holding mainly immovable property, which the MLI extends.

Sale by a French company	Treaty article	Who may tax	Indian rate before surcharge and cess (%)
Shares representing a participation of at least 10 percent in an Indian company	14(5)	India and France	12.5 long term (unlisted, over 24 months); 35 short term
Shares representing a participation below 10 percent	14(6)	France only	Nil in India
Shares of a company whose property consists mainly of Indian immovable property	14(4), with MLI Article 9(4)	India and France	Domestic rates
Buy back by the Indian company from 1 Apr 2026	14(5) or 14(6), on our reading	India if the participation is at least 10 percent	Capital gain; extra tax for promoters under section 69
Debentures of an Indian company	14(6), on our reading	France only	Nil in India
Shares of a French company holding Indian shares (indirect transfer)	14(6), on our reading	France only, unless the land rich rule applies	Treaty relief from section 9(10)
Indian immovable property or PE assets	14(1), 14(2)	India	Domestic rates

Sources: India France DTAA, Article 14; consolidated MLI text; sections 9, 69 and 197 of the Income Tax Act, 2025.

The 10 percent line matters for French minority investors. A French company holding 8 percent of an Indian company pays no Indian tax on the gain under the treaty. The PPT and GAAR can still apply. A French parent holding 100 percent pays Indian tax in full, so we test the holding on the date of each sale.

From 1 Apr 2026 the Finance Act, 2026 taxes a buy back as a capital gain, not a deemed dividend. Section 69 adds tax for promoters, and a holder above 10 percent of an unlisted company counts as one. A resident buyer withholds under section 393(2), serial 17. A seller claiming relief should first get a certificate in Form 128, covered in our note on lower TDS certificates.

How does the MLI apply to the India France treaty?

The MLI entered into force for France on 1 Jan 2019 and for India on 1 Oct 2019. It applies to Indian withholding events and taxable periods from 1 Apr 2020. The consolidated text published by the French tax administration shows these MLI provisions in the treaty:

1. Preamble and principal purpose test, MLI Articles 6 and 7(1). A benefit is denied where obtaining it was one of the principal purposes of an arrangement.
2. Land rich shares, MLI Article 9(4). Article 14(4) now looks at value from immovable property at any time in the 365 days before the sale.
3. Commissionnaire arrangements, MLI Article 12. The dependent agent rule in Article 5(5) widens and the independent agent rule in Article 5(6) narrows.
4. Anti fragmentation, MLI Article 13(4). Group activities in India are combined when testing the preparatory or auxiliary exemption.
5. Closely related enterprises, MLI Article 15. It defines the group link used by Articles 12 and 13 of the MLI.
6. Corresponding adjustments, MLI Article 17. It adds the missing second paragraph to Article 10 on associated enterprises.

The consolidated text shows no MLI change to Article 4 on residence or Article 27 on mutual agreement. So the place of effective management tie breaker and the three year MAP window stay as signed.

CBDT Circular No. 01/2025 of 21 Jan 2025 guides officers on the PPT, and no French provision is grandfathered. The usual target is a French holding company with no staff that owns a small Indian stake, because Article 14(6) exempts its gain.

Which documents does a French company need?

Section 159(8) of the Income Tax Act, 2025 needs two things. One is a tax residency certificate from France. The other is the prescribed information in Form 41, filed online under rule 75. The Indian payer also wants a PAN or the rule 217 details, declarations and a chartered accountant's Form 146.

Document	Issued or filed by	What it supports	Timing
Certificat de résidence fiscale pour les professionnels, Form 730	Service des impôts des entreprises (SIE) of the registered office or main establishment, or the DGE for large companies	Section 159(8)(a); Article 4	Must cover the date of credit or payment
Form 41 (old Form 10F)	French company, online	Section 159(8)(b); rule 75	Once per tax year, before the first payment
PAN, or the rule 217 details	French company	Avoids the higher rate under section 397(2)	Before tax is deducted
Beneficial ownership and no PE declarations	French company	Articles 5, 7, 11(2), 12(2) and 13(2)	Each year, updated on any change
Shareholding history	French company and Indian company	The 10 percent test in Article 14(5)	Before any share sale
Service or licence agreement with cost evidence	Both companies	Article 13; Articles 12(7) and 13(8)	Before the first invoice
Form 146 (old 15CB), then Form 145 (old 15CA)	Chartered accountant, then Indian company	Rate and article checked; remittance information	Before the money leaves India
Form 131 (old 16A)	Indian company, from TRACES	Credit for Indian tax in France	Within 15 days of the Form 144 due date

The notice to Form 730 says it serves where the foreign state has no treaty form of its own. It also serves where that state wants a document signed by the French administration. The SIE of the registered office certifies it, or the Direction des grandes entreprises for companies it manages. The notice warns that a form with errors or gaps will not be signed. India prescribes no form of its own, so Form 730 fits.

The Form 41 guidance note says the form is filed "only once in a tax year" and PAN is optional. It also says: "Benefit of DTAA is available only with filing of Form 41."

Our guide to Form 10F and the tax residency certificate covers Form 41 step by step. Rule 217 lists four items that stop the higher rate under section 397(2) where there is no PAN. They are contact details, the foreign address, the residence certificate and the foreign tax identification number.

If the certificate arrives late, deduct at the domestic rate. The French company then claims the excess through its Indian return. Point 6 of the Protocol also sets a three year window, after the calendar year of levy, for refund claims of excess source tax. Our Form 145 and 146 guide explains which part of Form 145 applies.

Does a French company have to file an Indian tax return?

Yes, whenever it takes the 10 percent treaty rate. Section 207(8) of the Income Tax Act, 2025 excuses a foreign company only on two conditions. Its Indian income must consist of section 207 items, and tax must be deducted at the section 207 rate or more. A 10 percent treaty rate is below 20 percent, so the exemption fails.

So a French parent paid a 10 percent dividend, royalty or fee files an Indian return for that tax year. It needs a PAN, and section 263 sets the due date for companies. Capital gains and PE profits also need a return. A French seller claiming the Article 14(6) exemption should file a return disclosing the sale.

On the French side, Article 25(2)(a) gives a French company a credit for Indian tax on dividends, interest and royalties. The credit is capped at the French tax on that income. How French domestic law taxes a dividend from an Indian subsidiary is a question for the French adviser.

What changed in 2026

The treaty text did not change in 2026 on the Indian side. The treaty page on incometaxindia.gov.in lists no notification after S.O. 2106(E) of 12 Aug 2009, when we checked it on 23 Oct 2026. The Indian law around the treaty changed, with a new Act and new forms from 1 Apr 2026.

Item	Until 31 Mar 2026	From 1 Apr 2026 or later	Instrument
Treaty notification power and more beneficial rule	Section 90(1) and 90(2)	Section 159(1) and 159(4)	Income Tax Act, 2025
GAAR override of treaties	Section 90(2A)	Section 159(6)	Income Tax Act, 2025
Residence certificate and other documents	Section 90(4) and 90(5)	Section 159(8)(a) and 159(8)(b)	Income Tax Act, 2025
Treaty information form	Form 10F, rule 21AB	Form 41, rule 75	Income Tax Rules, 2026
Withholding on payments to non residents	Section 195	Section 393(2), Table serial 17	Income Tax Act, 2025
Payer in default for short deduction	Section 201	Section 398(1)	Income Tax Act, 2025
Rates on dividends, interest, royalties and technical fees	Section 115A	Section 207	Income Tax Act, 2025
Remittance, statement and certificate forms	Forms 15CA, 15CB, 27Q and 16A	Forms 145, 146, 144 and 131	Income Tax Rules, 2026
GAAR carve out for investments made before 1 Apr 2017	Rule 10U(1)(d)	Rule 128(2) as substituted	Notification No. 55/2026, 31 Mar 2026
Buy back by an Indian company	Deemed dividend from 1 Oct 2024, so Article 11	Capital gain, so Article 14 on our reading	Finance Act, 2026

Board papers, Forms 146 and bank letters should now cite sections 159 and 393, not sections 90 and 195. The other changes are mapped in our note on the Income Tax Act, 2025.

What has happened since

This page first appeared on 20 Jan 2026. India and France signed an amending protocol (avenant) at New Delhi on 18 Feb 2026, during the French President's visit. The Chairperson of the CBDT, Ravi Agrawal, and the French Ambassador, Thierry Mathou, signed it. PIB announced it on 23 Feb 2026. It was not in force on 23 Oct 2026.

The steps so far:

1. 18 Feb 2026. Signing at New Delhi, per the French tax administration and the French Senate bill.
2. 23 Feb 2026. PIB and CBDT press release listing the main changes.
3. 16 Sep 2026. The French government deposits bill No. 951 (2025 to 2026 session) in the Senate to approve the avenant. Its explanatory memorandum says India had not yet notified France that its procedures were complete.
4. 23 Oct 2026. The India treaty page lists no notification of the protocol. The Senate file for bill No. 951 still shows it at the deposited stage, so France has not completed its own approval either.

Under Article 15 of the avenant, it enters into force the day after the later of the two diplomatic notifications. The provisions then apply on four timetables.

Provision	Treaty today	Avenant of 18 Feb 2026	When it applies in India once in force
Dividends	10% for any holding	5% where a company directly holds at least 10% of capital for a 365 day period that includes the payment date; 15% otherwise	Tax years beginning 1 Apr after two years from the end of the calendar year of entry into force
Gains on shares of an Indian company	India taxes only a participation of at least 10%	India may tax all such gains, with no threshold; land rich test at 50% over 365 days	Same delayed date as dividends
Fees for technical services	Managerial, technical or consultancy services, 10%	Make available test aligned with the India US treaty, 10%	Sums paid from 1 Jan 2024
Interest	10%, with exemptions	10%, with updated exemptions	Tax years beginning 1 Apr after the year of entry into force
Service PE	None	Services through staff for more than 183 days in any 12 months; more than 60 days for an associated enterprise	Tax years beginning 1 Apr after the year of entry into force
MFN clause, point 7 of the Protocol	In the text, but needs a notification after Nestle	Repealed by Article 14 of the avenant	Tax years beginning 1 Apr after the year of entry into force
Mutual agreement, exchange of information and collection	Articles as signed in 1992	Rewritten, with a new collection article	From entry into force

Sources: avenant text annexed to French Senate bill No. 951 of 16 Sep 2026; impots.gouv.fr page on the avenant; PIB release of 23 Feb 2026.

Three points need care:

1. The dividend change is slow. If the avenant enters into force in 2027, the 5 percent rate applies in India from tax years beginning 1 Apr 2030. A French parent should plan on 10 percent until then.
2. Minority shareholders lose ground. A holder below 10 percent moves from 10 percent to 15 percent on dividends. It also loses the Article 14(6) exemption on share gains once the delayed date arrives.
3. The fee change reaches back. The avenant applies the make available test to sums paid from 1 Jan 2024. On our reading, a management fee that made nothing available could then fall under Article 7, taxable in India only through a PE. India has not yet published a notification, so check how it treats past payments before claiming any refund.

The repeal of point 9 also matters to Indian companies that bill French customers. Point 9 stops France taxing royalties and technical fees that arise in France and are paid to Indian residents. On our reading, once the repeal applies, France may tax such fees within the new Article 13. Indian IT and engineering subsidiaries that invoice their French parent should model that change.

Worked example

A French parent paid a fee, a royalty, interest and a dividend

FranceCo SAS is resident in France and owns 100 percent of IndiaCo Private Limited, an engineering services company. A nominee holds one share for FranceCo. In tax year 2026-27 IndiaCo pays FranceCo four amounts:

1. A group management fee of INR 1,50,00,000 for finance, HR and legal support.
2. A software and trade mark royalty of INR 1,00,00,000.
3. Interest of INR 40,00,000 on a euro ECB from FranceCo, priced at arm's length.
4. An interim dividend of INR 5,00,00,000, declared by the Board on 10 Nov 2026.

FranceCo filed Form 41 for tax year 2026-27 in May 2026. It holds a Form 730 certificate covering every payment date, a PAN and declarations of beneficial ownership and no PE.

The management fee is a fee for managerial services under Article 13(4), so it bears 10 percent. The royalty bears 10 percent under Article 13(2), the interest under Article 12(2) and the dividend under Article 11(2). Without the treaty papers, every payment bears 20 percent under section 207. The year's total to FranceCo is INR 7,90,00,000, in the 2 percent surcharge slab. The domestic effective rate is 21.216 percent.

Payment (INR)	Treaty route, 10% (INR)	Domestic route, 21.216% (INR)
Management fee, 1,50,00,000	15,00,000	31,82,400
Royalty, 1,00,00,000	10,00,000	21,21,600
Interest on the ECB, 40,00,000	4,00,000	8,48,640
Dividend, 5,00,00,000	50,00,000	1,06,08,000
Total tax withheld	79,00,000	1,67,60,640
Net amount remitted from 7,90,00,000	7,11,00,000	6,22,39,360

The domestic dividend line builds up in three steps. Tax at 20 percent of INR 5,00,00,000 is INR 1,00,00,000. Surcharge at 2 percent adds INR 2,00,000. Cess at 4 percent on INR 1,02,00,000 adds INR 4,08,000, for INR 1,06,08,000. On the treaty route FranceCo receives INR 88,60,640 more.

IndiaCo deposits the dividend tax by 7 Dec 2026 under rule 218(2) and files Form 144 for the quarter by 31 Jan 2027. It reports the fee, royalty and interest in Form 48 under section 172. Our guide to dividends from an Indian subsidiary covers the company law steps.

What a 5 percent MFN claim would cost

Suppose IndiaCo had withheld 5 percent on the dividend on the old MFN argument. It would deduct INR 25,00,000 instead of INR 50,00,000. Section 398(1) makes IndiaCo an assessee in default for the INR 25,00,000 shortfall. Interest runs at 1 percent a month until the tax is deducted, so 12 months cost INR 3,00,000. Section 448 allows a further penalty up to the tax not deducted.

What the avenant would change once in force

Assume the avenant enters into force in 2027 and FranceCo's numbers stay the same. Two lines would move:

1. The dividend. From tax years beginning 1 Apr 2030, Article 11 as amended would cap the tax at 5 percent, because FranceCo holds over 10 percent for 365 days. Tax on INR 5,00,00,000 would fall from INR 50,00,000 to INR 25,00,000.
2. The management fee. Under the make available test, finance, HR and legal support usually makes nothing available. On our reading the fee would fall under Article 7, so India would tax it only through a PE. The INR 15,00,000 deducted each year would no longer be due, for sums paid from 1 Jan 2024.

The royalty and interest would stay at 10 percent.

Common mistakes

1. Citing Article 10 for French dividends. Fix: the France treaty uses Article 11 for dividends, 12 for interest, 13 for royalties and fees and 14 for gains.
2. Withholding 5 percent on dividends under the MFN clause. Fix: apply 10 percent under Article 11(2). Nestle settled the point on 19 Oct 2023.
3. Applying the UK make available test to a French management fee. Fix: Article 13(4) includes managerial services, so deduct 10 percent until the avenant applies.
4. Treating the 18 Feb 2026 avenant as law. Fix: it was not in force on 23 Oct 2026; check the treaty page before each payment.
5. Adding surcharge and cess to the treaty rate. Fix: apply 10 percent flat and cite the article in Form 146.
6. Ignoring the 10 percent participation line on a share sale. Fix: test the holding under Article 14(5) on the sale date and keep the history.
7. Relying on the French certificate alone. Fix: file Form 41 each tax year and keep beneficial ownership evidence.
8. Telling the parent the treaty rate ends its Indian filings. Fix: plan a PAN and an Indian return under section 207(8).

Checklist

1. Confirm the French company holds a Form 730 certificate, or another French residence certificate, covering each payment date.
2. File Form 41 once for the tax year before the first payment.
3. Obtain a PAN, or collect the four rule 217 items.
4. Classify each payment as dividend, interest, royalty, technical fee, business profit or capital gain, using the France article numbers.
5. Apply 10 percent to dividends, interest, royalties, equipment payments and technical fees.
6. Check whether interest is exempt under Article 12(3).
7. Review French staff presence for a fixed place, projects over six months and agents, including the MLI agent rule.
8. Collect beneficial ownership and no PE declarations, and keep the substance file for the PPT.
9. Deduct tax at the earlier of credit and payment, at the flat treaty rate.
10. Obtain Form 146 and file Form 145 before each remittance.
11. Deposit the tax by the 7th of the next month, file Form 144 and issue Form 131.
12. Test the 10 percent participation before any share sale.
13. Track the avenant's entry into force and its delayed dates for dividends and gains.
14. Remind the French company to file its Indian return.

To have us review a French payment or share sale before it happens, send the agreement and shareholding through our contact page.

Frequently Asked Questions

What is the dividend rate under the India France DTAA?+

It is 10 percent of the gross dividend under Article 11(2), for any size of holding. S.O. 650(E) of 10 Jul 2000 set that rate through the MFN clause. The avenant of 18 Feb 2026 would bring 5 and 15 percent rates, but it was not in force on 23 Oct 2026. Its dividend rates also apply only after a two year delay.

Can a French company claim a 5 percent dividend rate under the MFN clause?+

No. The Supreme Court held in Nestle SA on 19 Oct 2023 that an MFN benefit needs a notification. It also held that Slovenia, Lithuania and Colombia do not trigger the clause, because none was an OECD member when it signed with India. CBDT Circular No. 3/2022 takes the same view.

Is a management fee paid to a French parent taxed in India?+

Yes, at 10 percent today. Article 13(4) defines fees for technical services to include services "of a managerial, technical or consultancy nature", with no make available test. The Indian company deducts 10 percent under section 393(2), serial 17. The avenant of 18 Feb 2026 would narrow the definition once in force.

Does the Steria ruling still help French groups?+

Not on our reading. The Delhi High Court in Steria (2016) let the India UK make available test apply to France through the MFN clause without a notification. The revenue's appeal against Steria was heard with Nestle SA, where the Supreme Court held that a notification is required. At paras 59 and 60 it also relied on the omission of the make available condition from S.O. 650(E).

What is the TDS rate on interest paid to a French company?+

Article 12(2) caps it at 10 percent for a French beneficial owner. Interest paid to the French Government, the Banque de France or the AFD is exempt under Article 12(3)(a). Interest on loans backed by the named export credit bodies is exempt under Article 12(3)(b). Domestic law charges 20 or 35 percent.

Does India tax a French company's gain on Indian shares?+

Only where the shares represent a participation of at least 10 percent in the Indian company, under Article 14(5). Below 10 percent, Article 14(6) leaves the gain to France. The avenant of 18 Feb 2026 would let India tax all share gains, but only from its delayed application date.

Does the India France treaty have a service PE clause?+

Not today. Article 5 covers fixed places, construction and installation projects over six months, exploration over 183 days and agents. The avenant of 18 Feb 2026 adds a service PE at 183 days in any 12 months, or 60 days for an associated enterprise. That applies only once the avenant is in force.

Does the principal purpose test apply to the India France treaty?+

Yes. India and France both listed the treaty under the MLI, and MLI Article 7(1) applies. In India it has effect for withholding events and taxable periods from 1 Apr 2020. CBDT Circular No. 01/2025 guides officers. Beneficial ownership and GAAR under section 159(6) of the Income Tax Act, 2025 also apply.

How does a French company get a residence certificate for India?+

It completes Form 730, the certificat de résidence fiscale pour les professionnels, and asks its service des impôts des entreprises to certify it. Companies managed by the Direction des grandes entreprises go to that office. The certificate must cover each Indian payment date, and Form 41 must also be filed under section 159(8)(b).

Does a French parent need to file an Indian income tax return?+

Yes, when it takes the 10 percent treaty rate. Section 207(8) excuses a foreign company only where tax was deducted at the section 207 rate or more. A 10 percent treaty rate is below the 20 percent domestic rate. So the parent needs a PAN and files a return by the section 263 due date.

When will the 2026 India France protocol take effect?+

It enters into force the day after the later diplomatic notification, which had not happened by 23 Oct 2026. Most provisions then apply in India from tax years beginning 1 Apr after the year of entry into force. Dividends and capital gains wait two more years, and the fee article applies to sums paid from 1 Jan 2024.

What happens if the French certificate arrives after the payment?+

The Indian company deducts at the domestic rate under section 207, plus surcharge and cess. Section 159(8) makes the certificate a condition of treaty relief. The French company then files an Indian return with the certificate and Form 41 and claims the excess as a refund. A Form 128 certificate under section 395(1) is the other route.

Sources

• Income Tax Department, India France DTAA with Protocol and amending notifications (GSR 681(E), 7 Sep 1994; S.O. 650(E), 10 Jul 2000; S.O. 2106(E), 12 Aug 2009), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/france-comprehensive-agreements-1
• Supreme Court of India, Assessing Officer Circle (International Taxation) v. Nestle SA, Civil Appeal No. 1420 of 2023, 2023 INSC 928, 19 Oct 2023, https://api.sci.gov.in/supremecourt/2022/6394/6394_2022_8_1502_47832_Judgement_19-Oct-2023.pdf
• Central Board of Direct Taxes, Circular No. 3/2022, Clarification regarding the MFN clause in the Protocol to India's DTAAs with certain countries, 3 Feb 2022, https://www.incometaxindia.gov.in/documents/d/guest/circular-3-2022-pdf
• Direction générale des Finances publiques, Consolidated version of the France India convention as modified by the MLI, https://www.impots.gouv.fr/sites/default/files/media/10_conventions/inde/version_consolidee_de_la_convention_avec_inde_modifiee_par_la_convention_multilaterale.pdf
• Direction générale des Finances publiques, Notice to Form 730, Certificat de résidence fiscale pour les professionnels, 2026, https://www.impots.gouv.fr/sites/default/files/formulaires/730-sd/2026/730-sd_4815.pdf
• Direction générale des Finances publiques, Avenant à la convention avec l'Inde signé le 18 février 2026 (non entré en vigueur), https://www.impots.gouv.fr/avenant-la-convention-avec-linde-signe-le-18022026-non-entre-en-vigueur
• Sénat, Projet de loi No. 951 (2025 to 2026) autorisant l'approbation de l'avenant à la convention France Inde, deposited 16 Sep 2026, https://www.senat.fr/leg/pjl25-951.html
• Sénat, Text of bill No. 951 with explanatory memorandum and annexed avenant, 16 Sep 2026, https://www.senat.fr/leg/pjl25-951.pdf
• Press Information Bureau (Ministry of Finance), India and France sign Amending Protocol to update the DTAC, 23 Feb 2026, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2231751
• Central Board of Direct Taxes, Press release on the India France amending protocol, 23 Feb 2026, 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
• Income Tax Department, Income Tax Act, 2025 as amended by the Finance Act, 2026, https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf
• Income Tax Department, Section 159 of the Income Tax Act, 2025 (double taxation relief), https://www.incometaxindia.gov.in/w/section-159-89
• Income Tax Department, Section 207 of the Income Tax Act, 2025 (sub sections (1), (2) and (8)), https://www.incometaxindia.gov.in/w/section-207-78
• Income Tax Department, Section 9 of the Income Tax Act, 2025 (income deemed to accrue or arise in India), https://www.incometaxindia.gov.in/w/section-9-1
• Income Tax Department, Section 197 of the Income Tax Act, 2025 (long term capital gains), https://www.incometaxindia.gov.in/w/section-197-78
• Income Tax Department, Sections 393, 397, 398 and 448 of the Income Tax Act, 2025, https://www.incometaxindia.gov.in/w/section-393-6, https://www.incometaxindia.gov.in/w/section-397-6, https://www.incometaxindia.gov.in/w/section-398-6, https://www.incometaxindia.gov.in/w/section-448-6
• Income Tax Department, Rules 215, 217, 218, 219 and 220 of the Income Tax Rules, 2026, https://www.incometaxindia.gov.in/w/rule-215-1, https://www.incometaxindia.gov.in/w/rule-217-1, https://www.incometaxindia.gov.in/w/rule-218-1, https://www.incometaxindia.gov.in/w/rule-219-1, https://www.incometaxindia.gov.in/w/rule-220-1
• Income Tax Department, First Schedule to the Finance Act, 2026 (Part II rates), https://www.incometaxindia.gov.in/w/first-schedule-104
• Income Tax Department, Guidance note on Form 41, https://www.incometaxindia.gov.in/documents/d/guest/fn-41
• Income Tax Department, FAQs and Guidance Notes on Forms as per Income Tax Rules, 2026 (form map), https://www.incometaxindia.gov.in/faqs-and-guidance-notes-on-forms-as-per-income-tax-rules-2026
• Central Board of Direct Taxes, Circular No. 01/2025, Guidance for application of the Principal Purpose Test under India's DTAAs, 21 Jan 2025, https://www.incometaxindia.gov.in/documents/d/guest/circular-1-2025-pdf
• Central Board of Direct Taxes, Notification No. 55/2026, Income Tax (Amendment) Rules, 2026 (rule 128), 31 Mar 2026, https://www.incometaxindia.gov.in/documents/d/guest/notification-no-55-2026-1-pdf