Your Indian tax liability as an NRI in Canada depends on your 'residential status' under Section 6 of the Income Tax Act, decided every year by day-count, not by your OCI/citizenship status. As a Non-Resident, only income that is earned or received in India -- rent, capital gains, interest on Indian accounts -- is taxable in India; foreign income is not. Separately, the Canada Revenue Agency (CRA) decides Canadian tax residency using its own residential-ties test, and the India-Canada Double Taxation Avoidance Agreement (DTAA) then prevents the same income being fully taxed twice.
How Indian residential status is decided -- the day-count rules
Per the Income Tax Department's own guidance, an individual is a Resident of India in a
tax year if they meet either of two tests: (a) present in India for 182 days or more in that
year, or (b) present for 60 days or more in that year AND 365 days or more
across the preceding four years. Anyone who fails both tests is a Non-Resident (NRI) for
that year.
Special relaxations that matter for people based in Canada
- Indian citizens leaving India for employment abroad are tested only against the
182-day rule for that year -- the 60-day alternative does not apply to them.
- Indian citizens/PIOs visiting India (based abroad, visiting) are also generally
tested against 182 days, EXCEPT that a 120-day rule applies instead of 60 days if the
person's total Indian-sourced income exceeds ₹15 lakh in that year.
- Deemed Resident: an Indian citizen with more than ₹15 lakh of Indian-sourced
income who is not liable to tax in ANY other country or territory is deemed an Indian resident
regardless of days spent in India -- a provision aimed at closing a “stateless for tax
purposes” gap, not something that affects genuine Canadian tax residents.
Canada's own residency test -- residential ties, not just day-count
Separately from India's rules, the Canada Revenue Agency decides Canadian tax residency primarily by
examining an individual's residential ties to Canada -- a home, a spouse or dependants remaining in Canada,
and other secondary ties -- rather than a single day-count threshold, and also has statutory deeming rules
for individuals present in Canada 183 days or more in a year. It is entirely possible for someone to be
non-resident in India under Indian rules while still being Canadian tax resident under the CRA's ties test,
or vice versa -- the two tests are applied independently by each country.
Resident but Not Ordinarily Resident (RNOR)
Even if the day-count tests make someone an Indian Resident, they may still qualify as “Not
Ordinarily Resident” (a lighter tax status, closer to NRI treatment for foreign income) if they were a
non-resident in 9 of the preceding 10 years, or were present in India for 729 days or less over the
preceding seven years. This commonly applies to NRIs returning to India after many years in Canada.
The India-Canada DTAA -- avoiding being taxed twice on the same income
India and Canada have a bilateral Double Taxation Avoidance Agreement. Where the same income (for
example, Indian rental income that may also be reportable in Canada, since Canada taxes residents on
worldwide income) could otherwise be taxed in both countries, the DTAA lets the taxpayer claim a foreign tax
credit in one country for tax already paid in the other, under the article of the treaty that applies to
that specific income type. To claim DTAA relief in India, an NRI typically needs a Certificate of
Residency from the CRA and to file Form 10F.
Filing an Indian tax return as an NRI
An NRI must file an Indian Income Tax Return if their total Indian income exceeds the basic exemption
limit, or in certain other specified situations. NRIs typically use ITR-2 or ITR-3 depending on the nature
of their Indian income, and should check the current assessment year's exemption limit and filing rules
before filing, since these are revised periodically.
Does holding an OCI card make me an Indian tax resident?
No. Residential status for tax purposes depends entirely on physical presence (day-count) in India during
the relevant year under Section 6 -- OCI or even Indian citizenship status does not, by itself, make someone
a tax resident.
Can I be tax resident in both India and Canada in the same year?
It's uncommon but not impossible, since the two tests are independent -- India's Section 6 day-count test
and the CRA's residential-ties test are applied separately. Where dual residence genuinely arises, the
DTAA's tie-breaker provisions and foreign tax credit mechanism address the resulting double-taxation
risk.
Is NRE account interest really tax-free in India?
Yes, interest earned on NRE (Non-Resident External) and FCNR accounts is exempt from Indian income tax as
long as the account holder retains non-resident status under FEMA -- NRO account interest, by contrast, is
taxable.
How do I get a Certificate of Residency from the CRA to claim DTAA benefits?
The CRA issues a Certificate of Residency on request for Canadian tax residents, which is then submitted
along with Form 10F to Indian tax authorities to claim DTAA relief on Indian-sourced income.
