Canada NRI filing T1 return and India ITR: T1135, DTAA and foreign tax credits
Canadian tax residents must report worldwide income on their T1 return, including India NRO interest, rental income and capital gains. T1135 reports India financial accounts above CAD 100,000 in foreign cost. The Canada-India DTAA (1996) and the Federal Foreign Tax Credit avoid double taxation on most India income types. NRE interest is exempt from India tax but must still be reported on T1.
India NRO interest must be on T1; T1135 required if India accounts > CAD 100,000
As a Canadian tax resident, you must declare all India-source income (NRO interest, rent, capital gains) on your T1 return. India taxes the same income via TDS. The Canada-India DTAA and Canada's Federal Foreign Tax Credit (Line 40500) eliminate most double taxation. File T1135 if your aggregate India financial assets (NRE, NRO, FDs, mutual funds, stocks) exceeded CAD 100,000 at any point in the year.
Key points
- T1 worldwide income: India income is mandatory — Canada taxes residents on worldwide income — NRO interest, rental income and capital gains from India all belong on your T1.
- T1135: India accounts > CAD 100,000 — T1135 requires detailed disclosure of each India financial account (NRE, NRO, FD, demat, MF) if the aggregate foreign cost exceeded CAD 100,000 at any time.
- Federal FTC on Line 40500 — India TDS paid is claimed as a Federal Foreign Tax Credit, offsetting the Canadian tax on the same India income.
T1 reporting of India income: step by step
NRO interest: Include in income on T1 Schedule 4 (Interest and Other Investment Income). Gross interest — not net after TDS. Claim India TDS on Form T2209 Federal Foreign Tax Credits.
India rental income: Report on T1 Form T776 (Statement of Real Estate Rentals). Deduct allowable expenses. India TDS paid by tenant is claimed as FTC.
India capital gains: Report on T1 Schedule 3 (Capital Gains or Losses). Use CAD equivalent at the time of purchase and sale. India LTCG paid is an eligible FTC up to the Canadian federal tax on that gain.
NRE interest: Exempt from India tax but fully taxable in Canada as foreign income. No FTC available since India didn't tax it. Include in T1 income at the CAD equivalent.
T1135: what NRIs need to disclose
T1135 is triggered if the total foreign cost of all specified foreign property (SFP) exceeded CAD 100,000 at any point in the year.
Specified foreign property includes: NRE and NRO accounts, India FDs, Indian shares held outside a registered plan, Indian mutual funds, and India real estate held as investment (not personal use).
The simplified reporting method applies if SFP is CAD 100,000–250,000 — report by country total. Above CAD 250,000, detailed property-by-property reporting is required.
Penalties for failure to file: CAD 25/day up to CAD 2,500, plus further penalties for gross negligence. File on time.
Frequently asked questions
Is an NRE FD included in the T1135 calculation?
Yes. NRE and NRO deposits are specified foreign property. Include both at their CAD equivalent (using the Bank of Canada daily exchange rate at year-end or acquisition cost in CAD).
Does the Canada-India DTAA cover NRO FD interest?
Yes. Article 11 of the Canada-India DTAA caps interest withholding at 15% (treaty rate). Submit a declaration/W-8 equivalent to your Indian bank to apply the treaty rate and reduce TDS from 30% to 15%.
Do I need to file both T1135 and report the income?
Yes — they are separate obligations. T1135 is an information return (disclose the assets). Income on T1 is a tax return (report the earnings). One does not satisfy the other.