Background of the Amendment
India France Tax Treaty Update 2026: India and France signed a Protocol on 24 February 2026 to amend their Double Taxation Avoidance Convention (DTAC), originally concluded in 1992. The revision aims to align the treaty with global tax transparency standards.
A DTAC is the formal legal name used for certain Double Tax Avoidance Agreements (DTAA). These agreements ensure that income earned in one country by residents of another is not taxed twice.
Static GK fact: France is a founding member of the OECD, headquartered in Paris, which plays a major role in global tax reforms.
Understanding Double Taxation Avoidance
Double taxation occurs when the same income is taxed in both the source country and the residence country. This typically affects multinational companies, expatriates, and cross-border investors.
DTAA mechanisms provide tax credits, exemptions, or reduced withholding tax rates to avoid such duplication. India has signed over 90 DTAAs globally, strengthening its investment climate.
Static GK Tip: India’s power to levy taxes is derived from Article 265 of the Constitution, which states that no tax shall be levied except by authority of law.
Removal of the MFN Clause
One of the key amendments is the removal of the Most-Favoured-Nation (MFN) clause. The MFN principle is a core concept under the World Trade Organization (WTO) framework.
Under MFN, if one country grants favourable treatment to another, it must extend the same benefits to all WTO members. In tax treaties, however, the clause created interpretational ambiguity regarding automatic extension of benefits.
By eliminating the MFN clause, India and France have reduced uncertainty in treaty application and ensured clarity in tax benefits.
Static GK fact: The WTO was established in 1995 and is headquartered in Geneva, Switzerland.
Incorporation of BEPS MLI Provisions
The Protocol incorporates provisions of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI). The MLI entered into force in 2018, with provisions effective from 2019.
The MLI enables countries to modify existing bilateral treaties without renegotiating each agreement separately. It implements measures developed under the OECD/G20 BEPS Project.
BEPS refers to tax avoidance strategies used by multinational corporations (MNCs) to shift profits to low or no-tax jurisdictions. This reduces overall corporate tax liability and erodes the tax base of high-tax countries.
India is an active participant in the Inclusive Framework on BEPS, reflecting its commitment to fair taxation.
Significance for India
The amendment strengthens India’s treaty network and aligns it with evolving global standards. It enhances tax certainty while preventing treaty abuse.
For investors, clarity in taxation improves confidence. For governments, anti-abuse provisions protect revenue.
This step reflects India’s broader policy of promoting tax transparency, combating aggressive tax planning, and supporting international cooperation.
Static Usthadian Current Affairs Table
India France Tax Treaty Update 2026:
| Topic | Detail |
| Agreement Amended | India–France Double Taxation Avoidance Convention |
| Original Signing Year | 1992 |
| Amendment Date | 24 February 2026 |
| Key Removal | Most-Favoured-Nation clause |
| Key Inclusion | BEPS Multilateral Instrument provisions |
| MFN Principle | Core WTO non-discrimination rule |
| BEPS Objective | Prevent profit shifting and tax base erosion |
| MLI Enforcement | Entered into force in 2018 |
