India Amends Tax Treaty With France, Drops Most Favoured Nation Clause

India’s Ministry of Finance has announced a significant amendment to its double taxation avoidance agreement (DTAA) with France. The revision involves dropping the MFN clause, which previously allowed France to claim equal tax treatment if India offered more favorable terms to another OECD country.  

Officials explained that the MFN clause had created interpretational challenges, often leading to disputes over tax benefits. By removing it, India aims to simplify treaty provisions, provide clarity to investors, and strengthen compliance with global tax standards.  

The amendment is expected to streamline India’s tax framework, reduce litigation, and enhance transparency in cross-border transactions. Analysts believe this move reflects India’s broader strategy of recalibrating tax treaties to balance investor confidence with fiscal responsibility.  

The updated treaty will impact sectors such as technology, manufacturing, and services where French companies have significant investments in India. It also signals India’s intent to modernize its tax agreements in line with global best practices.  

Key Highlights 

• India amends tax treaty with France  
• Most Favoured Nation clause officially removed  
• Move aims to reduce disputes and improve clarity  
• French companies in India to see revised tax treatment  
• Part of India’s broader tax treaty modernization strategy  

Sources: Economic Times, Business Standard, Mint