- Why in news
- India and France signed an Amending Protocol to their 1992 Double Taxation Avoidance Convention during the French President's visit; the release is dated 23 February 2026.
- What it is
- The India-France DTAC, signed on 29 September 1992, is a bilateral tax treaty that decides which country may tax income earned across the two countries. It aims to prevent the same income being taxed twice and to curb tax evasion through information exchange. Such treaties allocate taxing rights over dividends, capital gains, fees for technical services and business profits.
- Original treaty
- The India-France DTAC was first signed on 29 September 1992 and is now amended by a Protocol.
- Capital gains
- Capital gains from sale of shares are taxable fully in the country where the company is resident.
- Dividend rates
- The single 10% dividend tax rate is replaced by 5% for holders of at least 10% of capital and 15% in other cases.
- MFN clause
- The Most-Favoured-Nation clause is deleted from the Protocol to the DTAC.
- FTS and PE
- Fees for Technical Services is aligned with the India-US treaty definition, and Service PE is added to Permanent Establishment.
- Information and MLI
- Exchange of Information is updated, a new Article on Assistance in Collection of Taxes is added, and BEPS MLI provisions are incorporated.
Don’t confuse with DTAC vs MLI: A DTAC is a bilateral treaty; the BEPS Multilateral Instrument (MLI) is a multilateral convention that modifies many bilateral treaties at once.
Don’t confuse with Service PE vs Fees for Technical Services: Service PE decides when service provision creates a taxable presence; FTS is a category of income defined in the treaty.
International bodies and relations: the largest group of news questions in Prelims (61 since 2013), often about background, members and location. In Mains, 27 news-triggered questions, mostly on India's interests.
Why it matters
- Gives greater tax certainty to taxpayers and may boost investment, technology and personnel flows between India and France.
- Aligns the treaty with international standards on information exchange and BEPS.
Problems
- Changes work only after both countries finish internal procedures, so benefits are delayed.
- Withholding rate of 15% on non-substantial dividends and wider PE may raise compliance disputes.
Way forward
- Complete ratification and notification quickly, with clear guidance on Service PE and FTS.
Put in your answer
Treaty updating: India-France protocol shows India aligning old tax treaties with BEPS and exchange-of-information standards.
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- 2018Prelims Q8Equalisation tax on non-resident advertising; tax credit under double taxation avoidance agreements
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
Prelims practice · Statements
Ours, not from a UPSC paper
Consider the following statements:
- 1.The Amending Protocol to the India-France Double Taxation Avoidance Convention gives full taxing rights on capital gains from the sale of shares of a company to the country where that company is a resident.
- 2.The Amending Protocol retains the Most-Favoured-Nation clause in the Protocol to the India-France Convention.
- 3.The Amending Protocol replaces the single 10% dividend tax rate with a split rate of 5% for holders of at least ten percent of capital and 15% in all other cases.
Which of the statements given above is/are correct?
True or false?
1 of 7
Statements the way Prelims prints them. Say first, then see the fact.
1.The Amending Protocol gives full taxing rights on capital gains from sale of shares of a company to the country where the company is resident.
True. Source/company-resident jurisdiction gets full taxing rights on share capital gains.
2.The Protocol retains the Most-Favoured-Nation clause in the India-France DTAC.
False. The MFN clause is deleted from the Protocol to the DTAC.
3.Under the Protocol, dividends are taxed at 5% for holders of at least ten percent of capital and 15% in all other cases.
True. Split dividend rate of 5% and 15% replaces the single 10% rate.
4.The Protocol aligns the definition of Fees for Technical Services with that in India's treaty with the United Kingdom.
False. It aligns with the India-US DTAA definition.
5.The Protocol adds Service Permanent Establishment to the scope of Permanent Establishment.
True. Service PE is added, widening the PE concept.
6.The original India-France DTAC was signed in 1992.
True. It was signed on 29 September 1992.
7.The Protocol introduces a new Article on Assistance in Collection of Taxes and takes effect immediately on signing.
False. The new Article is added, but the changes take effect only after internal procedures of both countries are completed.
Written by us from the release, not by UPSC; checked by a second model.
Worth revising until Prelims 2027: most news questions come within two years of the event.