India-France DTAA: P-Notes Under Pressure as India Secures Full Capital Gains Tax Rights

• India-France DTAA amended on Feb 23, 2026, granting India full source-based taxing rights on capital gains from share sales by French residents in Indian companies.
• The amendment impacts P-Notes routed via France, removing its appeal as a tax-efficient hub and aligning it with Mauritius and Singapore DTA changes.
• Experts see it as a potential "threat" to P-Note trade, but overall disruption is limited as P-Notes form only 1.5-2% of total FPI assets under custody.
• Short-term friction in equity liquidity, gradual unwinds, or shifts to direct FPI investments are expected, indirectly aiding SEBI's regulatory oversight goals.
• The impact is considered smaller than the 2017 Mauritius DTAA amendment, with rerouting to other countries like Netherlands/Belgium facing challenges.