If you are a Non-Resident Indian (NRI) living in France and investing in Indian listed shares, it is important to understand how capital gains tax and dividend taxation work under the India–France Double Taxation Avoidance Agreement (DTAA).

India has the primary right to tax capital gains arising from Indian resident companies. France taxes its residents on worldwide income at 30% (PFU) and generally allows Foreign Tax Credit (FTC) for tax paid in India.

Capital Gains Tax for France Resident NRIs

Under the amended India–France DTAA, India has clear taxing rights on capital gains arising from sale of shares of Indian companies. Therefore, an NRI resident in France must first pay tax in India as per Indian Income Tax laws.

Type of Gain (Listed Shares, STT Paid) Indian Tax Rate
Short-Term Capital Gains (≤ 12 months) 20% + surcharge + 4% cess
Long-Term Capital Gains (> 12 months) 12.5% + surcharge + 4% cess

France applies a flat 30% tax (Prélèvement Forfaitaire Unique – PFU) on capital gains. However, tax paid in India is generally allowed as a Foreign Tax Credit in France. If French tax exceeds Indian tax, the difference is payable in France.

Dividend Taxation for France Resident NRIs

Dividend income received from Indian companies is taxable in India under domestic law. France also taxes dividend income at 30% (PFU).

Foreign Tax Credit is generally available in France for Indian tax paid on dividends. Proper submission of a valid Tax Residency Certificate (TRC) helps ensure treaty benefits are applied correctly.

How Double Taxation is Avoided

The India–France DTAA prevents double taxation through the Foreign Tax Credit mechanism. This means:

  • India taxes capital gains and dividends first.
  • France taxes the same income at 30%.
  • Tax paid in India is credited in France.
  • Only the balance (if any) is payable in France.

Conclusion

For NRIs residing in France, investments in Indian shares are taxable in both jurisdictions. However, due to the India–France DTAA, double taxation is generally avoided through Foreign Tax Credit. In most cases, the overall effective tax aligns closer to France’s 30% rate.