Canada NRIs · Dividend Tax

Dividend tax on Indian shares for NRIs in Canada

Dividends from Indian companies are withheld at the non-resident rate before they reach you in Canada. Here's the treaty position and how to reclaim any excess.

When an Indian company pays you a dividend while you live in Canada, the company withholds tax at source before the money reaches you. India's default withholding on non-resident dividends is 20% under Section 393(2), the successor to Section 195. The India-Canada treaty position is nuanced: its lower dividend rate is reserved for substantial corporate shareholdings, so individual investors get no reduction and simply pay the 20% domestic rate (Article 10(2)). The lever that does help is the foreign tax credit on your home-country return.

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India-Canada key facts: dividend tax

Default non-resident TDS rate	20%
What the treaty changes here	It sets no lower rate on this income. What a treaty decides here is which country gets to tax it.
Treaty article / basis	Article 10(2) is bifurcated: 15% only when the recipient is a COMPANY owning ≥10% of the Indian payer's voting power
Your TRC issuing authority	the Canada Revenue Agency (CRA)

Rates reflect India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026) and the India-Canada treaty. Surcharge and cess apply on top where relevant.

How it works on the India side

Since the 2020 shift back to classical dividend taxation, dividends from Indian companies are taxable in the shareholder's hands and the company deducts TDS before paying. For a non-resident the default is 20% under Section 393(2) (Section 195 until 31 March 2026), plus surcharge and cess, and Section 115A taxes those dividends at 20% of the gross amount with no expenses allowed. A lower rate only ever comes from a treaty, and only where that treaty writes one for individuals: several of India's treaties reserve the reduced dividend rate for companies holding a large stake in the Indian payer, and some countries have no treaty with India at all, so portfolio investors there stay at the domestic rate.

Where a lower individual rate does apply, you claim it with Form 41 (formerly Form 10F) and a Tax Residency Certificate lodged with the company or broker, and any dividend withheld at the higher rate before your paperwork was on file is reclaimed through your Indian return. Where no lower rate applies, the 20% is generally your final Indian tax, so the questions worth asking are whether the payer withheld more than the correct rate and surcharge, and whether the country you live in gives you a credit for that Indian tax.

What changes because you live in Canada

Canada taxes worldwide income, so this Indian income goes on your T1 with a foreign tax credit (line 40500 federal via Form T2209, plus a provincial foreign tax credit on Form T2036) for the Indian tax paid. Indian assets over CAD $100,000 in cost amount must be disclosed each year on Form T1135, the CRA already receives your Indian account data through CRS, and a deemed-disposition departure tax (s.128.1) can crystallise on the day you give up Canadian residence, so the India-side rate is only part of the planning.

Frequently asked questions

Common questions from Canadian NRIs

India withholds 20% under Section 393(2). For Canadian NRIs, the India-Canada treaty's lower dividend rate is written for companies holding a large stake in the Indian payer, so individual investors get no reduction and pay the 20% domestic rate. The real relief is the foreign tax credit you claim on your Canada return for that Indian tax.

Not through the India-Canada treaty if you're an individual investor, because its lower rate applies only to substantial corporate holdings, so you stay at the 20% domestic rate. What does help is the foreign tax credit: when you report the dividend on your Canada return, you claim credit for the Indian tax already deducted, so you aren't taxed twice on the same income.

Go further

Read the full guide, or see your country's complete picture

NRI ITR for interest, rent and dividend income Canada NRI tax guide: every income type and the rates that apply

Dividend Tax sorted, by an Indian CA who works with Canadian NRIs

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