Canada NRI selling India property: T1 Schedule 3, India LTCG and DTAA relief
Canadian tax residents selling Indian property must report the capital gain on T1 Schedule 3 and also file India ITR. India charges LTCG at 12.5% plus 12.5% buyer TDS. Canada taxes 50% of the capital gain at the marginal rate. The Canada-India DTAA and the Federal Foreign Tax Credit (Form T2209) credit India LTCG tax against Canadian tax on the same gain. CAD/INR conversion is required for the T1 calculation.
Canada taxes 50% of India property gain at marginal rate; India LTCG credited via FTC
Canadian tax residents selling India property: India charges 12.5% LTCG plus 12.5% buyer TDS. Canada includes 50% of the CAD-converted capital gain in taxable income on T1 Schedule 3. At Canada's marginal rates (33% federal + provincial), the effective combined rate on the gain can be 13–17% Canadian. The Federal Foreign Tax Credit (T2209) credits India LTCG tax against Canadian tax on the same gain. Net: if India LTCG tax exceeds Canadian tax on 50% inclusion, no additional Canadian tax is due on that portion.
Key points
- Canada: 50% capital gains inclusion on India property — Only 50% of the India property gain (in CAD) is included in Canadian taxable income on T1 Schedule 3.
- FTC via Form T2209: India LTCG credited against Canadian tax — India LTCG tax paid is creditable against Canadian tax via the Federal Foreign Tax Credit (Form T2209), up to the Canadian tax on the same income.
- T1135: disclose India property if investment > CAD 100,000 — India investment property must be reported on T1135 if the total specified foreign property exceeds CAD 100,000 (not applicable to personal-use family home).
Calculating T1 Schedule 3 gain for India property
Acquire CAD cost basis: the original CAD amount you paid (using Bank of Canada rate at purchase date) plus CAD equivalent of improvements and selling costs.
Sale proceeds in CAD: convert INR sale proceeds (net of TDS and Indian brokerage) to CAD at the Bank of Canada rate on the sale date.
Capital gain in CAD: proceeds minus adjusted cost base (ACB).
Inclusion amount: 50% of CAD capital gain included in T1 taxable income.
Federal FTC: India LTCG tax paid (converted to CAD at sale date rate) is entered on Form T2209. Offsets Canadian federal tax on the foreign-source gain.
DTAA treatment and Canada-India Article 13
Under Canada-India DTAA Article 13 (Capital Gains), both countries retain the right to tax gains on immovable property in their territory.
Canada taxes its residents on worldwide property gains — the DTAA does not override this.
The Federal FTC prevents double taxation by crediting India LTCG against Canadian tax. Provincial foreign tax credits also exist in some provinces — check your province's rules.
Frequently asked questions
Is there a Canada principal residence exemption for my India home?
Canada's principal residence exemption applies to a property designated as your principal residence for the years it qualifies. An India property can be designated as a Canadian principal residence if it was ordinarily inhabited by you or your family for those years. Designating India property as principal residence precludes designating a Canadian property for the same years.
What if my India property was gifted or inherited?
Inherited India property: the ACB is the fair market value at the date of death of the deceased (converted to CAD). Gifted property: the ACB is the original donor's ACB unless it is a transfer at arm's length. Consult a CPA for estate-transfer rules.
Does Canada's Alternative Minimum Tax (AMT) affect India property gains?
AMT applies to capital gains in Canada and may affect taxpayers with large capital gains even when FTCs reduce the regular tax. Consult a CPA if the India property gain is large (above CAD 200,000).