When does Canadian tax residency begin?
Canadian tax residency is based on "residential ties" — primarily having a home available to you, a spouse or dependents in Canada, and social/economic ties. For new permanent residents, you are typically a Canadian tax resident from your landing date.
For new immigrants, your first Canadian tax year is a partial year (from landing date to December 31). You file a T1 return for the period you were resident.
Pre-arrival income: income earned before your landing date is generally not taxable in Canada. However, you must report the fair market value of assets you owned on landing date — these values become your Canadian "deemed acquisition cost" (cost basis) for future sales.
T1135: reporting foreign assets in Canada
Form T1135 (Foreign Income Verification Statement) must be filed if you own foreign property with total cost over CAD $100,000 at any point during the tax year.
This includes: - Indian bank accounts (NRE, NRO, savings) - Indian stocks and mutual funds - PPF account - EPF account - Property in India (the rental value + fair market value)
T1135 is an information return — it doesn't necessarily create tax on its own, but failing to file it has penalties up to $2,500/year per missed form (plus additional penalties for gross negligence).
Note: the threshold is "cost" (what you paid), not current value. If you bought Indian mutual funds for CAD $60,000 and they're now worth CAD $120,000, the threshold is still based on $60,000 cost.
India-Canada tax treaty: what it means for your Indian income
The India-Canada Tax Treaty (formally: Convention Between Canada and the Republic of India for the Avoidance of Double Taxation) covers income types including employment income, dividends, interest, royalties, and capital gains.
Key provisions for new immigrants: - Dividends: Indian dividends paid to Canadian residents are taxed in India at a reduced withholding rate (15% under treaty vs. standard 20%+). Canada taxes the dividend too but allows a foreign tax credit for the Indian tax paid. - Interest: NRO interest earned in India is taxed in Canada, but Indian withholding tax creates a foreign tax credit. - Capital gains: the treaty allocates taxing rights on Indian property gains to India (where the property is located). Canadian residents who sell Indian property will pay Indian capital gains tax and may need to deal with the interaction with Canadian inclusion rules.
A Canadian CPA who specializes in immigrants (specifically South Asian clients) will know these treaty articles and how to apply them correctly.
Indian mutual funds and PFICs in Canada
Unlike the US (where Indian mutual funds are PFICs with punitive treatment), Canada doesn't have the PFIC regime. Canadian tax treatment of Indian mutual funds is generally as foreign investment property — gains are taxed as capital gains (50% inclusion rate in Canada) and dividends/income are taxed as foreign income.
However, there are still complexity points: - Indian mutual funds may be treated as "foreign investment entities" with specific rules in some situations - Currency conversion (INR to CAD) affects your cost basis and gain calculation - Switching between Indian mutual fund schemes (which Indian law treats as a switch, not a sale) is a disposition for Canadian tax purposes
The practical advice: keep good records of when you bought Indian investments and at what INR price. Your Canadian CPA will need this to calculate capital gains when you eventually sell.