Negotiators concluded the India-EU free trade agreement on 27 January 2026, but it is not yet in force. On 11 September 2026 the European Commission asked the Council to authorise signing and conclusion, signature is being reported for December 2026, and entry into force is targeted for early 2027 after the European Parliament and India complete their steps. When it applies, it should help German firms through lower tariffs on components and machinery, clearer rules for sending staff, and stronger intellectual property enforcement. It will not change how an Indian subsidiary is formed, funded or taxed, and there is still no investment protection treaty.
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Key facts
| Concluded | 27 January 2026, at the 16th India-EU Summit in New Delhi |
|---|---|
| Next steps | Commission request to the Council of 11 September 2026; signing reported for December 2026; European Parliament consent and Indian ratification still needed |
| Target date | Entry into force reported for early 2027; treat as a target, not a date |
| Services | Wider access for EU firms, including financial services and maritime transport, and a temporary-entry annex covering intra-corporate transferees and project professionals |
| Goods | Tariff cuts phased over several years, including automotive components (five to ten years), machinery, chemicals and pharmaceuticals |
| Investment protection | Not in the FTA. A separate Investment Protection Agreement and a Geographical Indications agreement are under negotiation |
| Tax | The FTA does not alter income tax. The 1995 India-Germany tax treaty continues to apply |
| Does it change FDI rules? | No. Sector caps, the Automatic Route and RBI reporting under FEMA apply as before |
What the agreement is, and how it differs from the tax treaty
A free trade agreement sets the terms of trade in goods and services, the temporary movement of staff, intellectual property and dispute settlement between governments. The tax treaty divides the right to tax income. A German company that sets up in India touches both, but only the tax treaty decides how much Indian tax is withheld on a dividend, and only Indian company law and FEMA decide how the subsidiary is formed and funded.
Germany is one of India's largest trading partners in Europe, and the FTA is a significant change in the legal setting for German exporters. Because it is not yet in force, plan the subsidiary on today's rules and treat the FTA as an upside that arrives during year one or two.
Goods: components, machinery and the supply chain
- Automotive components: tariff cuts are phased over five to ten years, which matters to German suppliers shipping parts to an Indian plant or assembling in India.
- Machinery, chemicals and pharmaceuticals: tariff cuts are phased, so landed-cost models for the Indian subsidiary should be updated once the schedules are final.
- Rules of origin: an Indian subsidiary that exports to Germany will need origin proof to claim the lower duty. Build the record keeping early.
- Carbon border adjustment: separate EU rules on carbon-intensive imports apply to some Indian exports regardless of the FTA. See supply chain and ESG duties.
Services and people
The services chapter opens parts of the Indian market to EU suppliers and adds a temporary-entry annex with clearer rules for intra-corporate transferees, business visitors and professionals working on cross-border projects. The detailed schedules will decide whether a particular German engineering, software or consulting firm gains anything, so read India's schedule for your own sector once published, and do not assume a commitment removes licensing in regulated fields.
For staff, the practical rules still sit in Indian visa law and the India-Germany social security agreement. See relocating German staff and German employees in India: the treaty and the social security agreement.
The investment protection gap
The FTA is a trade agreement. It does not give a German investor treaty claims against India, and the older bilateral investment treaties were largely wound down from 2016 and 2017. A separate EU-India Investment Protection Agreement is under negotiation but is not in force. Until then, a German parent should rely on its contracts, a neutral arbitration clause and clean FEMA reporting, as set out in contracts, courts and arbitration.
What does not change
- Company law and FDI: a German company still forms an Indian private limited company under the Companies Act, 2013 and follows the FDI Policy. See the incorporation guide.
- FEMA reporting: Form FC-GPR, the pricing floor and the 60-day allotment rule are unchanged. See funding and FEMA.
- Tax: Indian profits, Withholding Tax and permanent establishment risk follow Indian law and the 1995 treaty. See the India-Germany tax treaty, article by article.
How to use the FTA in planning
- Build the business case on current tariffs and rules, then model the FTA as a later improvement.
- Decide whether the Indian entity will import from Germany, make in India, or export back; each depends on different parts of the agreement.
- Keep origin and customs records from day one so you can claim preferences when they start.
- Check the signed text and the notified Indian rules before relying on any press summary.
- Revisit the staffing plan when the temporary-entry annex takes effect.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Federal Central Tax Office (BZSt), Handelsregister and the Deutsche Bundesbank.
Frequently asked questions
Is the India-EU free trade agreement in force?
Not yet. It was concluded on 27 January 2026. The Commission asked the Council on 11 September 2026 to authorise signing, signature is being reported for December 2026, and entry into force is targeted for early 2027.
Does the India-EU FTA change how a German company sets up an Indian subsidiary?
No. Company law, FEMA, the FDI Policy and tax rules for the subsidiary are unchanged. The FTA affects tariffs, services access and staff mobility.
Does the FTA protect German investments in India?
No. It has no investment protection chapter. A separate EU-India Investment Protection Agreement is under negotiation, so rely on contracts and arbitration for now.
Will the FTA lower tariffs on German machinery and components?
Yes, over phased periods once it is in force, including automotive components over five to ten years. The detailed schedules decide each product.
Does the FTA reduce Indian Withholding Tax on dividends paid to a German parent?
No. Withholding Tax is governed by the Income-tax Act, 2025 and the 1995 India-Germany tax treaty, which caps dividends at 10%.
Related guides
The India-Germany Tax Treaty (DTAA), Article by Article: India as Source State, Germany as Residence State
The India-Germany double taxation agreement explained article by article from the German parent's point of view: the flat 10% rates table, permanent establishment, share gains, relief and how to claim.
Read the guide →German Employees Working in India: What the Tax Treaty and the Social Security Agreement Mean
How income tax and social security apply to German staff in India: the 183-day treaty test, the 2009 social security agreement, the 48-month detachment rule, certificates of coverage and German tax residence.
Read the guide →Supply Chain Due Diligence, Sustainability Reporting and CBAM: How German and EU Rules Reach Indian Operations
How German and EU supply chain, sustainability and carbon border rules reach an Indian subsidiary or supplier: the German Supply Chain Act (LkSG), EU reporting, CBAM, and what to prepare.
Read the guide →Contracts, Courts and Arbitration: Choosing Law and Seat, and Enforcing in India and Germany
How a German parent protects its Indian subsidiary contracts: choice of law, DIS and other arbitration, why German court judgments need a fresh suit in India, enforcing awards, stamping and the investment protection gap.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and German rules change often; confirm current requirements before acting.