Underneath the proposal – nonetheless topic to ultimate approval from each governments – French corporations holding greater than a ten% stake in an Indian entity would face a 5% tax on dividends, down from the present 10%. Nevertheless, for minority shareholders, the dividend tax would improve to fifteen% from the present 5%.
One other proposed change to the Double Taxation Avoidance Settlement (DTAA) would permit India to levy taxes on share gross sales by any French entity, eradicating the present requirement that an investor should maintain not less than a ten% stake. This could shift capital positive factors taxation to a source-based framework.
Officers stated these points had been beneath dialogue for a while. In recent times, India has renegotiated related tax treaties with Singapore and Mauritius, ending their capital positive factors exemptions as effectively.
Whereas earlier studies recommended that each international locations had agreed to delete “most favoured nation” (MFN) clause, officers keep no ultimate choice has been taken.
The draft settlement, they stated, is “but to be finalised” and requires cupboard approval. “It has gone by a number of revisions, and it’s untimely to remark as there isn’t a ultimate phrase from both aspect, together with on the MFN clause,” an official advised ET, requesting anonymity.
Negotiations, which started in 2023, have been delayed primarily as a result of disagreements over MFN clause.”The upper 15% dividend withholding tax, along with capital positive factors taxes on fairness shares, could scale back after-tax yields for buyers holding lower than 10% fairness in an organization,” stated Suresh Swamy, companion at Worth Waterhouse & Co LLP.