Hello,
Your situation is a fairly common one these days, especially with remote work becoming more mainstream. Since you're working from India for a Canadian employer and getting paid on Canadian payroll, both Canadian and Indian tax laws can come into play. A general overview based on your questions is provided below:
1) What’s the max duration I can work on Canadian payroll from India without triggering any tax issues?
There isn’t a fixed "maximum" duration universally stated, but under Indian tax laws, if you stay in India for 182 days or more in a financial year (April to March), you may become a tax resident of India. This means India could tax your global income, even if you're already paying taxes in Canada.
Canadian tax residency is more complex and based on "significant residential ties." If you're just temporarily in India and still maintain strong ties to Canada (home, dependents, health coverage, etc.), you might still be considered a Canadian tax resident.
2) Is this duration calculated per calendar year or Indian/Canadian financial year?
In India, tax residency is assessed based on the Indian financial year — April 1 to March 31.
Canada uses the calendar year — January 1 to December 31 — for tax reporting purposes.
So, when evaluating your tax residency status, you’ll need to consider both timelines separately according to each country’s laws.
3) What are the tax implications if I overstay beyond the allowed duration?
If you exceed the 182 days’ period in India during a financial year, you could become an Indian tax resident. In this case:
- India may require you to declare and pay taxes on your worldwide income, including your Canadian salary.
- You may be eligible to claim foreign tax credit (FTC) in India for taxes paid in Canada, based on the India–Canada Double Taxation Avoidance Agreement (DTAA).
- Filing obligations in both countries could arise, and may potentially increase your compliance burden.
It’s also worth noting that even if your employer is okay with your arrangement, there could be corporate tax or Permanent Establishment (PE) risks for them in India if this becomes a long-term situation.
Recommendation:
This is a nuanced area involving cross-border tax law, so it’s strongly recommended that you speak to a qualified tax advisor or expert team of qualified CAs like Setindiabiz who understands both Indian and Canadian tax systems. They'll be able to assess your exact situation and advise you on filing requirements, foreign tax credits, and any risk mitigation strategies.
Hope this answer has clarified things better!