India-Canada tax treaty and Indian property

What the treaty says about property

Payotte read the English text published by the Government of Canada.

• Article 6, income from immovable property. Income from immovable property, including income from agriculture or forestry, “may be taxed in the Contracting State” where the property is situated. This covers income from direct use, letting or any other use. Immovable property is defined by the law of the State where it is. A protocol paragraph extends Article 6(1) to income, other than capital gains, from alienating immovable property.
• Article 13, capital gains. Gains from the alienation of “any property, other than” ships or aircraft in international traffic “may be taxed in both Contracting States”. The text I read has only two paragraphs and does not set a rule for shares that derive value from property; Payotte has not read the 2013 protocol.
• Article 23, relief from double taxation. For Canada, “tax payable in India on profits, income or gains arising in India shall be deducted from any Canadian tax payable” in respect of the same income. For India, Canadian tax on Canadian-source income is allowed as a credit against Indian tax on that income, up to the Indian tax attributable to it.
• Article 4, residence. If an individual has a permanent home in both countries, residence goes to the country of the “centre of vital interests”; then habitual abode; then nationality; then the competent authorities decide.
• Article 26, exchange of information. The tax authorities exchange information needed to apply the treaty and the domestic laws.

What this means for rent and for a sale

The two countries each apply their own domestic law on the amount of the gain, the exemptions and the dates. This guide does not compute either country’s tax.

India’s side: claiming treaty relief

Section 159 of the Income-tax Act, 2025 covers treaties:

• Where a treaty applies, the provisions of the Act “shall apply to the extent they are more beneficial to that assessee” (section 159(4)).
• A non-resident can claim treaty relief only when he or she has “a certificate of his being a resident in any country” obtained from that country’s government and provides “such other documents and information, as may be prescribed” (section 159(8)). A certificate of residence is therefore the first document to obtain from Canada.
• Section 159(6) says the provisions of Chapter XI apply “even if such provisions are not beneficial” to the assessee.
• Income tax residence in India is decided by section 6; see rental income tax for NRIs.

A tax deducted at source at “rates in force” under section 393(2), Table 17 does not itself apply the treaty; if you think treaty relief or a lower rate applies, consider a certificate under section 395(1) (selling property and TDS). Payotte has not read the prescribed form or the treatment of the certificate of residence in the Income-tax Rules.

Canada’s side: the foreign tax credit

The Canada Revenue Agency says you can generally claim the federal foreign tax credit if you were resident in Canada at any time in the year and reported on your Canadian return foreign income taxed by another country. In most cases, for each country you can claim the lesser of the foreign income tax you actually paid and the tax otherwise payable in Canada on your net income from that country. Form T2209 calculates it. Residents of provinces other than Quebec use Form T2036 for the provincial credit; Quebec residents turn to Revenu Québec.

The CRA also warns that “a tax treaty with another country may affect whether you are eligible for this credit”, and that income not taxable in Canada under a treaty should not be reported for the credit. Foreign property reporting (for example a T1135 form) may apply to Indian property; Payotte has not read the CRA’s current text on it, so ask a Canadian tax professional.

What differs by state

The treaty and the foreign tax credit are national. Stamp duty, registration, circle rate and property tax are state or municipal and are not affected by the treaty: stamp duty calculator, property tax in Indian cities.

Which professional to consult

A chartered accountant in India and a Canadian tax professional, ideally one who knows both systems, for the two returns and the credit. A property lawyer (advocate) enrolled with the State Bar Council for the sale documents (property lawyer).