NRI deposits in India and canadian tax

[coolbreeze]

I got my PR card one year ago but I have been living in India since then.
I plan to move to canada now in the next one month.

My tax query;

I have about $300k deposits in Indian rupees with Indian banks giving me roughly 8% after tax interest.

If I move to canada and leave this money here, the deposits will be converted to NRI ( non-resident indian) accounts and charged
a very high tax on interest and will also have to be reported in my canadian tax return as foreign income.

Anybody tell me if it is better tax and investment wise to leave that money in deposits in India or take it all with me
to canada when I move.

 

[seton]

That's about $5,700 CAD. You will need to factor a couple things:

- Inflation/Currency strength: If the Indian Rupee declines against the CAD, then you could quickly lose any interest gain if you plan to convert the money later on.

- Volatility - Is that 8% risk free? You won't get 8% in Canada without some risk. Risk-free GICs in Canada are between 2.5-3%.

I would say generally, if you plan to keep that money in India to use in India at some point, then it might be worth leaving it there. If you ultimately plan to use it in Canada, then it may be better to convert it and invest it here.

Another consideration is that after your first return in Canada, you will get $5,500 for your TFSA (tax free account) that you can invest as you wish. Any income earned within the TSFA is not taxed, when accrued or even withdrawn. You may want to maximise your TFSA when you can.

 

[coolbreeze]

Thanks Seton;

1. No,it is CAD 300k when converted back from Indian rupees. The interest is risk free in govt bank CDs.
After I move to canada the Indian banks will deduct larger tax on interest and my yield will be roughly 7% post-tax.

Will I have to pay any tax on that in canada as foreign income if I leave the money in India?

2.About TFSA that you mentioned, If I bring all of CAD 300k to canada with my first move to canada, how will it be taxed?

 

[dbss]

Thanks Seton;

1. No,it is CAD 300k when converted back from Indian rupees. The interest is risk free in govt bank CDs.
After I move to canada the Indian banks will deduct larger tax on interest and my yield will be roughly 7% post-tax.

Will I have to pay any tax on that in canada as foreign income if I leave the money in India?

2.About TFSA that you mentioned, If I bring all of CAD 300k to canada with my first move to canada, how will it be taxed?

you cannot put $300k in TFSA...no way..

 

[seton]

Thanks Seton;

1. No,it is CAD 300k when converted back from Indian rupees. The interest is risk free in govt bank CDs.
After I move to canada the Indian banks will deduct larger tax on interest and my yield will be roughly 7% post-tax.

Will I have to pay any tax on that in canada as foreign income if I leave the money in India?

Generally, you would pay taxes on your worldwide income in Canada.

If this is a government held investment, you may potentially benefit from a Canada-India tax treaty which will reduce the taxes deducted by India. It depends on the investment - you should consult a tax accountant. Nonetheless, you would be eligible for foreign tax credits to normalise your net tax rate to the highest rate between both countries.

2.About TFSA that you mentioned, If I bring all of CAD 300k to canada with my first move to canada, how will it be taxed?

You get $5,500 contribution room per year, so you won't be able to invest your funds in that tax free account.

If you bring it to Canada (as cash), you will only be taxed on the interest you earn on the investment, not the capital amount.

Inflation and foreign currency rates may be a bigger impact to you. For example, the CAD dollar has appreciated against the Rupee by around 30% in the last 4 years. I won't pretend to crystal ball where foreign currencies go, but there is a lot of additional risk if you ever plan to convert the funds at a later date.

 

[coolbreeze]

Thanks very much Seton.

Yes, you are so right. I may lose all the benefit of 7% interest income to very high inflation in India and a stronger CAD when
I need the money in canada. THough they are making efforts to curb the huge Indian current account deficit ( gold and oil imports).
but who knows how successful they will be and if it may depreciate further.

 

[seton]

True - it could also go the other way. The Canadian dollar could take a dip as well (5 years ago it used to be 80 cents to a US Dollar) - who knows.

 

[vermas]

Dear friends, I have somewhat similar issue. I immigrated to Canada in Aprl 2013 and have been here for almost a year. I left approx CAD 12.0K in the bank fixed deposit and apprx CAD 13.0 in Mutual Funds in India. Till date, I have not notified the bank and the mutual funds AMCs regarding change of my status from Resident Indian to Non Resident Indian. My father is the joint holder in the bank account. In maturity, the FD amount will be creditted to my bank account next month. I also intend to redeem my mutual fund holdings at the same time. Kindly advise how can I have this money belonging to me repatriated to myself in Canada.

Your help and guidance will be greatly appreciated.

Regards,

Sunny

 

[Ruhi123]

Hi
I m an NRI leaving in Dubai,
I hav just got my PR and will go to CAN for first time in July, 2013 & will stay there till Aug 13.
I cannot take all the funds to CAN right now during my first visit but planning to take balance in my next visit around 200K CAN$. in MAR 2014.
What tax will be deducted on the amount i take during my second visit?
I hav NRI FDs non taxable in India, will it be taxable once i complete my PR card formalities, while keeping this amount back in India only?

Thx for yr guidance in adv

 

[Gary Goldshmidt]

Depending on the time of immigration I believe but please don't hold me to this I can check the legislation with the financial services companies I deal with that you can keep your money off shore for five years tax free. After five years you have to declare your worldwide income if you are residing in Canada permanently.

Other assets and taxation can even be more complication such as real estate, assets from proceeds of a divorce, inheritance etc...

 

[Ruhi123]

Depending on the time of immigration I believe but please don't hold me to this I can check the legislation with the financial services companies I deal with that you can keep your money off shore for five years tax free. After five years you have to declare your worldwide income if you are residing in Canada permanently.

Other assets and taxation can even be more complication such as real estate, assets from proceeds of a divorce, inheritance etc...
[Dear Gary, thank you for your feedback, I would really be greatful if you can check, if the properties purchased and accumulated saving in India in the form of FD or investment is taxed or not even if it is with us prior getting PR. As at this point I would not be able to sell and bring all amounts with me. I am really worried as I will not be in a position to take required POF amount as I live in Dubai and expecting baby, so for me to take leaves and rush india for this purpose is not advisable, and I have planned my travel to canada first week of july, so if there is a provision where in any income earned prior becoming PR is not taxed will be really a soothing news. However thanks a million for your quote, Good day}

 

[steaky]

[Dear Gary, thank you for your feedback, I would really be greatful if you can check, if the properties purchased and accumulated saving in India in the form of FD or investment is taxed or not even if it is with us prior getting PR. As at this point I would not be able to sell and bring all amounts with me. I am really worried as I will not be in a position to take required POF amount as I live in Dubai and expecting baby, so for me to take leaves and rush india for this purpose is not advisable, and I have planned my travel to canada first week of july, so if there is a provision where in any income earned prior becoming PR is not taxed will be really a soothing news. However thanks a million for your quote, Good day}

You should consider to have the baby born in Canada otherwise it would mean inconvenience to you and baby - As PR, you can only sponsor your child while in Canada. You wouldn't want separate with it unless the baby has a visa exempted passport to come with you to Canada

Therefore, I suggest you go to India to get your money (at least the POF amount), get a stopover flight, land in Canada and give birth there. You can keep and come back later for the rest of the assets in India if you wish.

 

[swapno]

Hi All,
I am new in Canada, landed permanently three weeks back. I have two questions, I know somebody has asked the same questions before
1. How Can I transfer money (without tax) from Singapore after selling my prperty there? I haven't sold it yet and planning to keep it for few years.
For that case when I will sell will need to give tax for that? Can I declare my flat in Singapore now so that I don't need to give any tax when I will sell it.
2. How to transfer money to India? I gave a bank account in CIBC.

Appreciate your help please. I landed in March, came back after three weeks, again came permanently on May 22nd'13.
Regards,
Swapno

That's about $5,700 CAD. You will need to factor a couple things:

- Inflation/Currency strength: If the Indian Rupee declines against the CAD, then you could quickly lose any interest gain if you plan to convert the money later on.

- Volatility - Is that 8% risk free? You won't get 8% in Canada without some risk. Risk-free GICs in Canada are between 2.5-3%.

I would say generally, if you plan to keep that money in India to use in India at some point, then it might be worth leaving it there. If you ultimately plan to use it in Canada, then it may be better to convert it and invest it here.

Another consideration is that after your first return in Canada, you will get $5,500 for your TFSA (tax free account) that you can invest as you wish. Any income earned within the TSFA is not taxed, when accrued or even withdrawn. You may want to maximise your TFSA when you can.

 

[steaky]

Hi All,
I am new in Canada, landed permanently three weeks back. I have two questions, I know somebody has asked the same questions before
1. How Can I transfer money (without tax) from Singapore after selling my prperty there? I haven't sold it yet and planning to keep it for few years.
For that case when I will sell will need to give tax for that? Can I declare my flat in Singapore now so that I don't need to give any tax when I will sell it.
2. How to transfer money to India? I gave a bank account in CIBC.

Appreciate your help please. I landed in March, came back after three weeks, again came permanently on May 22nd'13.
Regards,
Swapno

Since you are not yet a Canadian resident for tax purposes, your selling proceeds of your Singapore property is not subject to Canadian tax anyways, you shouldn't worry about taxes. However, you should worry about wire charges and commissions between your Singaporean, Indian and Canadian banks. If you have a HSBC Premier, using globalview, you pay zero on charges and commissions.

 

[swapno]

I have landed in Canada and started my job for three weeks. I am not sure what do you mean by not resident
The thing is If I bring that money for example 2 years later, how do I bring ang do I need to pay tax? Else is there any way that I can register that property or something.
Kindly advice

Since you are not yet a Canadian resident for tax purposes, your selling proceeds of your Singapore property is not subject to Canadian tax anyways, you shouldn't worry about taxes. However, you should worry about wire charges and commissions between your Singaporean, Indian and Canadian banks. If you have a HSBC Premier, using globalview, you pay zero on charges and commissions.