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Canada NRI selling India property: T1 Schedule 3, India LTCG and DTAA relief

NRI Dash Research Team · Last reviewed: 2026-06-28

A Canadian NRI selling Indian property refers to a Canada-resident person of Indian origin disposing of residential or commercial property situated in India, which creates concurrent tax obligations in both countries. In India, the buyer must withhold TDS at 20% plus surcharge and cess on long-term capital gains, or 30% on short-term gains, remitting it to the Income Tax Department before registration. In Canada, the same gain must be reported on the T1 General return as a foreign capital gain; 50% of the gain is included in Canadian taxable income and taxed at the individual's marginal rate, which can reach approximately 53% in high-income provinces. The India-Canada Tax Convention assigns primary taxing rights over real property to the country where it is situated, allowing the Canada Revenue Agency to grant a foreign tax credit for Indian tax paid, thereby avoiding full double taxation. The NRI must also file an Indian ITR to claim any excess TDS refund and document the indexed cost of acquisition.

Canada taxes 50% of India property gain at marginal rate; India LTCG credited via FTC

Canadian tax residents selling India property: India charges 12.5% LTCG plus 12.5% buyer TDS. Canada includes 50% of the CAD-converted capital gain in taxable income on T1 Schedule 3. At Canada's marginal rates (33% federal + provincial), the effective combined rate on the gain can be 13–17% Canadian. The Federal Foreign Tax Credit (T2209) credits India LTCG tax against Canadian tax on the same gain. Net: if India LTCG tax exceeds Canadian tax on 50% inclusion, no additional Canadian tax is due on that portion.

Key points

Calculating T1 Schedule 3 gain for India property

Acquire CAD cost basis: the original CAD amount you paid (using Bank of Canada rate at purchase date) plus CAD equivalent of improvements and selling costs.

Sale proceeds in CAD: convert INR sale proceeds (net of TDS and Indian brokerage) to CAD at the Bank of Canada rate on the sale date.

Capital gain in CAD: proceeds minus adjusted cost base (ACB).

Inclusion amount: 50% of CAD capital gain included in T1 taxable income.

Federal FTC: India LTCG tax paid (converted to CAD at sale date rate) is entered on Form T2209. Offsets Canadian federal tax on the foreign-source gain.

DTAA treatment and Canada-India Article 13

Under Canada-India DTAA Article 13 (Capital Gains), both countries retain the right to tax gains on immovable property in their territory.

Canada taxes its residents on worldwide property gains — the DTAA does not override this.

The Federal FTC prevents double taxation by crediting India LTCG against Canadian tax. Provincial foreign tax credits also exist in some provinces — check your province's rules.

Frequently asked questions

Is there a Canada principal residence exemption for my India home?

Canada's principal residence exemption applies to a property designated as your principal residence for the years it qualifies. An India property can be designated as a Canadian principal residence if it was ordinarily inhabited by you or your family for those years. Designating India property as principal residence precludes designating a Canadian property for the same years.

What if my India property was gifted or inherited?

Inherited India property: the ACB is the fair market value at the date of death of the deceased (converted to CAD). Gifted property: the ACB is the original donor's ACB unless it is a transfer at arm's length. Consult a CPA for estate-transfer rules.

Does Canada's Alternative Minimum Tax (AMT) affect India property gains?

AMT applies to capital gains in Canada and may affect taxpayers with large capital gains even when FTCs reduce the regular tax. Consult a CPA if the India property gain is large (above CAD 200,000).

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