Canadian tax in indian itr

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d c bhargava

50 Points Joined March 2014

My daughter technically holds a Canadian Permanent Resident card. She has stayed there only for a month and is a non-resident for tax purposes. Although she lives in India, she has a small salary income which a Canadian company directly deposits in her a/c there.

Being a non- resident, she will file her returns in Canada for income earned there only, on which she will pay 20% tax only. The tax on her Indian income is 33.9 %

My question is: While mentioning her Canadian income in the Indian Tax returns, how will her Canadian income be treated?

Will Indian Income tax people ignore Canadian income as tax already paid
Or will Indian Income tax people charge her the amount of difference in tax i.e. applicable Indian tax rate 33.9% – 20 % Canadian tax already paid?
Or will they add Canadian income to her Indian income and tax @ 33.9 % on the whole amount minus Canadian amount of tax already paid?

Replies (6)

Mukesh Saini

STUDENT

73 Points Joined November 2014

In case of a person Resident in india

His/Her total income whether from india or outside india will be liable to tax in india .IT act will not consider the tax paid outside india if you are resident india.

So TAXABLE INCOME = INDIAN INCOME + FOREIGN INCOME (In case of your Daughter).

Hope it wil helps you.

d c bhargava

50 Points Joined March 2014

Thank you so much. But what happens to the tax paid in Canada in their Returns on income generated there. In view of the Double Tax Avoidance Treaty beteen the two countries, cannot we deduct the tax already paid in Canada while filing Returns in India for both incomes?

Pl reply.

Thanks

DC Bhargava.

Mukesh Saini

STUDENT

73 Points Joined November 2014

For this purpose please refer the DTAA with canada.

Although from my point of view or as per DTAA with other countries if you are resident in india no other deduction of taxes paid outside india shall be allowed.

Thanks

Mukesh saini

d c bhargava

50 Points Joined March 2014

Thank you for your very prompt replies.

You are right, that If you are a Resident, income earned by you anywhere in the world shall be taxable in India and has to be included in your total income.

But by its very definition, Double Taxation Avoidable Agreement seeks to avoid double taxation.

If TDS has been deducted on your income you are allowed to take credit of such taxes. Since income may be taxed at source i.e. from the place it originated and is also usually taxable in the country of residence, the DTAA makes sure that the taxpayer is not adversely impacted

Taking benefit of a DTAA involves obtaining a TRC or a tax residency certificate,

Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method. By exemption method, income is taxed in one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.

In my daughter’s case, there is TDS of tax at source, along with TDS of Canada Pension Plan and TDS of Employment Insurance.

If you agree, then it should be quite simple. From the total income (canada +Indian) in the Indian Return, she should claim TDS for tax amount deducted in Canada (at 20.5% there). Kindly confirm.

DC Bhagava

Mukesh Saini

STUDENT

73 Points Joined November 2014

Go-ahead but it is preferable to file return in consultation of Chartered Accountant.

Thanks.
Mukesh saini

Abhinav

397 Points Joined February 2011

If your daughter is RNOR for the financial year in question, she need not disclose canadian income in indian tax return. It is only when her status is ROR that she needs to disclose that income in indian tax return.

I assure she is an ROR.

If the employer-employee relation subsists, the income will have to be offered in Indian tax return as "Income from Salaries" else "Income from Other sources"

In the tax return, she will also have to fill Schedule FSI which stands for foreign source income and reference it to the particular item in Other source schedule where the same has been declared.

From the total tax, she can claim the tax already paid in Canada - this is irrespective whether DTAA exists or not.

There is a possibility also that she can "exempt" the canadian income from Indian tax return, however the DTAA provisions have to be carefully seen before claiming exemption method as not all incomes can be claimed exempt under DTAA.

Also ensure that your discloses foreign assets and bank accounts in Schedule FA in tax return. This is a mandatory requirement under Black Money Law in India.