Double Tax Avoidance Agreement (DTAA) Between India and France

If you are an Indian resident earning income in France, this is the article you were looking for. Here, we try to address the tax implications you may encounter in France and India due to such foreign income. There may be a situation where you might need to pay taxes in both the countries i.e., France and India. You must be thinking, isn’t it double taxation? Yes, it is.. and to avoid the same both the countries have entered into a Double Tax Avoidance Agreement (DTAA). DTAA is a tax treaty between two countries to avoid taxing the same income twice. 

DTAA between India and France is a bilateral agreement, the objective of which is promoting economic trade and avoiding double taxation. As per Section 90 of the Income Tax Act, a resident Indian who pays tax on income in any other contracting state will get a deduction from tax on that income. Keep reading to learn more about India France DTAA.

What is DTAA Between India and France?

The agreement between the Government of India and France regarding the avoidance of double taxation came into action on 1 August 1994. The double tax avoidance agreement between India and France has 31 Articles. 

India France DTAA will work in a manner where a resident of India who earns in France will have to pay taxes in France, while India will give a deduction on the amount of income tax paid. i.e., in case a resident of India earns income which is taxable in France, the Income Tax department of India will give a deduction on tax paid in France.

These articles discuss definitions of taxes, contracting states, taxation of interest, dividends, business profits, etc. Apart from that, these articles also discuss air transport, capital gains, non-government pension and annuities and much more. Therefore, this agreement offers a clear understanding of taxation of different incomes for residents of contracting states (India and France).

Significance of India France DTAA for Both Countries

DTAA between India and France equally benefits residents of both countries India and France in terms of investment and tax benefits. Here are some of the benefits that residents of both contracting states will get:

• DTAA makes the countries attractive for investing without having to worry about double taxation. According to the agreement, you need to pay tax on income you earn from different sources in only one country.
• DTAA ensures that only genuine residents of both countries get the benefits of this agreement.
• Lower withholding tax, which means that taxpayers have to pay lower TDS on dividend, royalty and interest income in contracting states.
• This agreement also reduces possibility of tax evasion of residents in both the contracting states.
• Further, Article 21 of the DTAA covers the exemptions from taxes provided to students studying in universities of other contracting states. 

Taxes Covered Under DTAA

According to Article 2 of DTAA between India and France, the taxes on which this convention is applicable are as follows:

In France (French tax)

• Income tax is known as ‘impot sur le revenu’ along with any withholding tax; advance payment or prepayment in relation to it is known as ‘precompte’. 
• Wealth tax is known as ‘impot de solidarite sur la fortuna’.
• Corporation tax is referred to as ‘impot sur les scietes’ along with withholding tax; any advance payment or prepayment associated with it is known as ‘precompte’. 

In India (Indian tax)

• Income tax along with surcharge applicable on it
• Wealth tax
• Surtax

Apart from all the taxes mentioned above, the convention will also be applicable to any identical or similar tax that is imposed by any of the contracting states after date of signature of the agreement. Authorities of contracting states need to notify each other about any changes or addition made to their taxation laws. 

India France DTAA TDS Rates

Tax is deductible at source when a non-resident receives payment. The percentage of tax deduction is, however, prescribed in the relevant DTAA. As per India France DTAA, withholding tax rate applicable is 10%. Whether you earn royalty, dividends, interest or fees for technical services, the rate of TDS shall not exceed 10%. This rate is, however, different for DTAA between India and other countries.

Indian France Double Tax Avoidance Agreement assures the taxpayers that they won’t be taxed more than 10% of the gross income from dividends, royalties or fees for technical services. 

Taxation on Capital Gains under DTAA

Article 14 of Double Tax Avoidance Agreement between India and France deals with taxation rules applicable to capital gains. These are as follows:

• If a resident of a contracting state earns from any immovable property (which may include agriculture and forestry) which is situated in the other contracting state, capital gain is taxable in the other contracting state itself.
• Income from moveable property that is being used for business purposes in the other contracting state is taxable in the other contracting state only.
• In case of income earned from operation of ships or aircraft in international traffic or any movable property relating to operations of ships and aircraft, it will be taxable in the contracting state of which the person who owns it is a resident.
• If a resident earns by owning shares of capital stocks of a company whose property directly or indirectly includes immovable property located in the contracting state, gains will be taxed in the contracting state.
• Capital gains from shares of at least 10% of a company owned by resident of contracting state will be taxed in the contracting state.
• Capital gains from other types of property than the ones mentioned above will be taxable in the contracting state of resident.

Final Word

Indians residing in France can avail tax benefits mentioned under DTAA between India and France by submitting some documents every financial year within the due date. These include a Tax Residency certificate, PAN number and Form 10F. Process to apply for obtaining benefit of DTAA is also extremely simple, which allows hassle-free taxation.

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