Selling Indian property as a Canadian resident — India tax, Canadian tax, and the credit

Selling Indian property as a Canadian resident touches two tax systems at once.

India taxes the gain because the property is in India. For a long-term holding of land or a building sold on or after 23 July 2024, an NRI's gain is taxed at a flat 12.5% plus surcharge and cess (Section 112), and the buyer must deduct TDS at source on the payment to you (Section 195).

Canada taxes the same gain because, as a resident, you're taxed on worldwide income. Canada works the gain in Canadian dollars and brings 50% of it into your income at your marginal rate (the capital-gains inclusion rate for individuals; the higher two-thirds rate proposed in 2024 was cancelled in March 2025, so 50% applies).

Two systems, one sale — exactly what the treaty is built to reconcile.

The India-Canada Double Taxation Avoidance Agreement (DTAA) stops you being taxed twice in full. Under Article 13, gains on immovable property may be taxed where the property sits — India — and Canada, your country of residence, then gives relief.

That relief is the foreign tax credit (Article 23, the credit method): Canada credits the Indian tax you paid on the gain against the Canadian tax on the same gain. Because Canada includes only 50% of the gain in income, the credit is proportionate too — you can't credit more Indian tax than the Canadian tax on that gain. So you broadly pay the higher of the two countries' tax, not the sum of both.

The credit is only as good as the proof behind it. Canada wants to see how the Indian gain was computed and how much Indian tax was actually paid. If the India computation is vague or the tax-paid figure can't be evidenced, the credit can be reduced or questioned. The India-side documentation is the linchpin.

Several India-side things have to be right before any Canadian credit can be claimed cleanly.

First, the TDS. The buyer deducts under Section 195, and by default deducts on the whole sale price — far more than the tax on the actual gain. A lower-deduction certificate (Form 13) lets the buyer deduct on the correctly computed gain instead, so your money isn't locked up as excess TDS waiting for a refund.

Second, the computation. The India gain is worked on the Indian cost basis — your original cost, or the 1 April 2001 value for older property — at the Section 112 rate, with the right surcharge and cess. The Canadian landing-day cost base sits alongside it: India uses the India cost, Canada uses the arrival-day value, and the two stay distinct.

Third, the proof of tax paid. Once the India return is filed and the tax settled, an India-tax-paid certificate shows exactly how much Indian tax was paid on this gain — the figure your Canadian accountant feeds into the foreign tax credit.

On treaty paperwork: where the Indian side needs a treaty declaration, it's filed on Form 10F (and from the 2026-27 tax year India's renumbered successor, Form 41, applies), backed by a tax residency certificate from Canada.

Meera lives in Vancouver and is a Canadian tax resident. She sells a Bengaluru flat she's held long-term.

India side: the gain is computed on her Indian cost basis at the flat 12.5% long-term rate (plus surcharge and cess) under Section 112. Her CA gets a Form 13 lower-deduction certificate first, so the buyer deducts TDS under Section 195 on the gain, not the full sale price. After filing her India return, she holds an India-tax-paid certificate showing the Indian tax paid on the gain.

Canada side (her Canadian accountant's work, not ours): the same gain is converted to Canadian dollars; 50% is included in her income at her marginal rate. Under the treaty, the Indian tax she paid is credited against the Canadian tax on that gain, so she isn't taxed twice. Where the landing-day step-up applies, only post-arrival growth is in the Canadian gain to start with.

The pieces that made the Canadian credit work — the India computation, the lower TDS, the tax-paid certificate — were all produced on the India side. That's the part we deliver.