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Foreign income and tax credit

skarme312

Star Member
Aug 2, 2017
141
13
My wife immigrated to Canada from India. She had income in India before and after landing in Canada. For 2020 taxes I realize that she has to report all the income she earned post landing in Canada (employment, interest, etc.). However, I'm a bit confused about the tax credit portion of things. In India the fiscal year starts from April 1st and ends March 31. Hence she has filed taxes from April 2019 to Mar 2020. She is yet to file for April 2020 to March 2021. Assuming she does manage to file her India taxes before the April 30 deadline for Canada taxes, how do I calculate her tax credit for Canada 2020 returns? I was thinking of dividing the taxes paid on both her 2019-2020 and 2020-2021 India returns by 12 (so it is for a single month). Then multiplying the 2019-2020 number by 3 and the 2020-2021 number by 9. This way I get total tax paid in India for 2020. Does this seem reasonable? Also can I claim foreign tax credit for the full 2020 tax paid in India or does that also have to be pro-rated to the days she was in Canada.
 

@trigger

Star Member
Jun 24, 2019
148
27
Usually there should be a letter from the employer similar to Form16 to report the amount paid and tax deducted. Once you get the numbers, it shoudl be simple to claim the FTC in the return.
 

skarme312

Star Member
Aug 2, 2017
141
13
Usually there should be a letter from the employer similar to Form16 to report the amount paid and tax deducted. Once you get the numbers, it shoudl be simple to claim the FTC in the return.
Thanks for your reply. She is drawing a salary from a company her dad setup so not sure she has that form. I have her 2019-20 tax return which gives me the total tax paid. Once she files for 2020-21 I will have that too. I'm just wondering as to the method of pro-rating.
 

NiSn

Star Member
Mar 17, 2018
148
27
Hi I have a related case

I am a Canadian Tax resident for 2020 (Moved to Canada in Jan 2020). I have following incomes for the year

Canada (Jan 2020 - Dec 2020) - Salary in Canada

India (Jan 2020 - Dec 2020) - Interest income from FDs in India in NRO bank account, Capital Gains realised from selling of Equity shares in India (No TDS deducted as this was Resident Demat account)

India (Jan 2021 - Mar 2021) - Interest income from FDs in India in NRO bank account, Capital Gains realised from selling of Equity shares in India (No TDS deducted as this was Resident Demat account)

Now in India, I am yet to pay any taxes on Capital Gains from Sale of Equity shares, while TDS has been deducted @30% on Interest incomes in bank accounts. I wanted to know, since both Interest income & Capital gains in India will be taxable both in India as well as Canada, how should I avail tax exemptions under DTAA?

Shall I first pay Canada taxes in full by reporting global income, and then while filing India Tax return after Mar 2021 say that income is already taxed in Canada so dont tax it in India? Or income tax will have to be paid in India and I have to find a way to get tax credit in canada? How can that be done since I wont know income tax to be paid in India till I file the returns?
 

micheal_tye

Newbie
Jul 28, 2020
8
1
Foreign sourced qualified dividends and capital gains (including long-term capital gains, collectible gains, unrecaptured section 1250 gains, and section 1231 gains) that are taxed in the other countries at a reduced tax rate must be adjusted in determining foreign source income on Form 1116, Foreign Tax Credit.
 

@trigger

Star Member
Jun 24, 2019
148
27
Foreign sourced qualified dividends and capital gains (including long-term capital gains, collectible gains, unrecaptured section 1250 gains, and section 1231 gains) that are taxed in the other countries at a reduced tax rate must be adjusted in determining foreign source income on Form 1116, Foreign Tax Credit.
That's not the correct form, it seems to be for US. For Canada, the correct form is T2209.
 
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