1. The "Calendar Clash"
The biggest headache for Indo-Canadians. You must reconcile India's fiscal year statements (Apr-Mar) to fit Canada's calendar tax year (Jan-Dec).
(Jan-Mar of Year X) + (Apr-Dec of Year X) to correctly report on your Canadian T1 Return.
2. The T1135 Trap (Foreign Income Verification)
Failure to file this form entails severe penalties (up to $2,500 + interest per year). It is purely informational, but mandatory.
Does this apply to you?
- Includes: Indian Stocks, Mutual Funds, Bank Accounts (NRE/NRO), Rental Property.
- Excludes: Personal-use property (e.g., a vacation home strictly for personal use and not rented out).
3. Income Stream Analyzer
4. Capital Gains & The Inclusion Rate
Unlike the US (Short/Long term rates) or India (Indexation), Canada uses an "Inclusion Rate."
The Rule
50% of your capital gain is added to your income and taxed at your marginal rate.
*Note: Recent 2024 budget proposed increasing this to 66.67% for gains over $250k in a year.
The Indian Conflict
India may tax the gain too (with or without indexation). You claim a Foreign Tax Credit (FTC) on your Canadian return for tax paid in India.
Warning: Exchange rate fluctuations can turn an Indian "profit" into a Canadian "loss" (or vice-versa).
Taxable Portion of $10,000 Gain
Moving Back to India?
Beware the "Departure Tax" (Deemed Disposition).