rental income from india -taxable in canada

[indiabusinesspr]

hi
i am looking to apply for business immigration to canada in manitoba and i have few questions regarding taxation point of view in canada
Canada tax worldwide income of its tax resident. these question are important since adding income will lend me in the highest tax bracket i.e 46.4% as compared to indian 30%…….

1. Rental income - if a PR holder from India has Rental income from properties in india . how this income is going to be taxed in canada. as per my knowledge from what i have studied following point has come up
a) as per india and canada treaty it says rental income may be taxed in the country where immoveable property belongs. i.e if indian hold property in india and get rental income he will pay tax as per indian tax rules . and he will show his income as exempted income in canadian tax return
b) or he has to add this income in his canadian income and pay tax accordingly. like let say if canadian income is 80000 and rental income is 100000 then his total income is 180000 and he will pay tax as per federal and provincial tax bracket and get deduction of tax(municipality and indian income tax) from total tax paid in canada.
kindly confirm the same
for example:-
issue is there since rental income is too high in tune of $150000 annually and in india highest tax bracket is
30 % whereas in canada it comes to 29(federal)+17.4 (manitoba)=46.5 % in canada. hence one paying extra 16.5 % of tax … which is huge (approx $25000 ).

 

[praveenj]

hi
i am looking to apply for business immigration to canada in manitoba and i have few questions regarding taxation point of view in canada
Canada tax worldwide income of its tax resident. these question are important since adding income will lend me in the highest tax bracket i.e 46.4% as compared to indian 30%…….

1. Rental income - if a PR holder from India has Rental income from properties in india . how this income is going to be taxed in canada. as per my knowledge from what i have studied following point has come up
a) as per india and canada treaty it says rental income may be taxed in the country where immoveable property belongs. i.e if indian hold property in india and get rental income he will pay tax as per indian tax rules . and he will show his income as exempted income in canadian tax return
b) or he has to add this income in his canadian income and pay tax accordingly. like let say if canadian income is 80000 and rental income is 100000 then his total income is 180000 and he will pay tax as per federal and provincial tax bracket and get deduction of tax(municipality and indian income tax) from total tax paid in canada.
kindly confirm the same
for example:-
issue is there since rental income is too high in tune of $150000 annually and in india highest tax bracket is
30 % whereas in canada it comes to 29(federal)+17.4 (manitoba)=46.5 % in canada. hence one paying extra 16.5 % of tax … which is huge (approx $25000 ).

Did you find answer? Looking for same information. Thanks

 

[hyong1991]

Did you find answer? Looking for same information. Thanks

You have to file T1135 to declare your foreign income & foreign property.

You have to declare you rental income in Canada, since your're a tax residence of Canada.
In general, if this is a straight forward case, whatever taxes you paid in india, will be used as a "credit" or deduction on your Canadian tax return.

For example indian property taxed paid to indian authorities : 1,000 cad or equivalent

And now your canadian tax return you reported rental income, and the tax payable is 1100 cad , you have to pay an additional 100cad on your tax return.

https://www.treaty-accord.gc.ca/text-texte.aspx?lang=eng&id=102409

"Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions - which shall not affect the general principle hereof - and unless a greater deduction or relief is provided under the laws of Canada, tax payable in India on profits, income or gains arising in India shall be deducted from any Canadian tax payable in respect of such profits, income or gains."

but please consult a local CPA for more indepth tax planing and questions

 

[Harrington]

Foreign rental real estate is treated in the same manner as domestic rental real estate for Canadian income tax reporting purposes because a Canadian taxpayer is required to report his or her worldwide income.

walgreenslistens

 

[despairedh1b]

Do you have to file taxes both in Canada as well as India in this case?

 

[hyong1991]

Do you have to file taxes both in Canada as well as India in this case?

if you have income from india, you'd have to file tax return.

The reason why there's a treaty between india and Canada is with the intention that you would not be taxed twice, hence in the event that you'd already paid your taxes to the Indian govt, that amt will return as a tax credit on your canadian tax return.

 

[vkg]

I think the requirement is to report your global income; however, which global income is taxed in Canada will depend on the nature of income (employment income or interest income or business income), and the tax treaty with that country.
In this case - rental income in India - I also read in the tax treaty that income from immovable property will be taxed in India. So rent income can be reported in Canada tax returns, but it need not be taxed here. If someone here knows any other provisions/laws/treaty clause per which rental income from Indian property should be taxed, pls share and advise

 

[Naheulbeuck]

I think the requirement is to report your global income; however, which global income is taxed in Canada will depend on the nature of income (employment income or interest income or business income), and the tax treaty with that country.
In this case - rental income in India - I also read in the tax treaty that income from immovable property will be taxed in India. So rent income can be reported in Canada tax returns, but it need not be taxed here. If someone here knows any other provisions/laws/treaty clause per which rental income from Indian property should be taxed, pls share and advise

This is the wrong interpretation of the rules. Dtaa between countries determine where taxes should be paid first, in the case of immovable property in India, all Dtaa currently signed with India stipulate that India has the right of first claim: you pay taxes first to India. Those treaty, then DO NOT eliminate the taxation in the country of residence of the individual, it prevents double taxation by either (in rare cases) making the income exempt (not the case with Canada) or, and that's the case for almost all Dtaa signed by India, giving a credit for the taxes paid to India.

You would have to file taxes in both countries.

@hyong1991 explained it well, please see their post.

In the end you pay the exact same amount of taxes as any property you own anywhere while being a Canadian tax resident, but you pay most of those taxes to India, and whatever balance left is paid to Canada. Dtaa are to avoid double taxation (paying more in aggregate) but it is (in Canada's Dtaa at least) not a mean to reduce overall taxes.

 

[vkg]

Thanks @Naheulbeuck for your reply and explanation.
So given that a Canadian resident will be taxed on his/her global income, it will lead to increase in overall taxes, as the tax rates in Canada are higher.
Yes, double taxation will be avoided by virtue of DTAA, but the tax outgo increases for the resident. For an immigrant who might have planned investments in the foreign country based on that country's tax laws, this is additional tax (cost) not factored in.

 

[Naheulbeuck]

Thanks @Naheulbeuck for your reply and explanation.
So given that a Canadian resident will be taxed on his/her global income, it will lead to increase in overall taxes, as the tax rates in Canada are higher.
Yes, double taxation will be avoided by virtue of DTAA, but the tax outgo increases for the resident. For an immigrant who might have planned investments in the foreign country based on that country's tax laws, this is additional tax (cost) not factored in.

That's correct but it is a normal consequence of being a tax resident of that new country. It is fairer to have everyone who lives in this country taxed the same way irrespective of their origins. Unfortunately the tax system is full of holes and issues that leads to failure in fairness but in this case it is a good attempt.