Why was tax taken off my Indian mutual fund redemption?
Because deduction at source applies on redemption for a non-resident. The fund or the platform works the tax out and holds it back before the proceeds reach your account, using the only facts in front of it: the units sold and the price they went at. It cannot know whether you also realised a loss elsewhere in the year, whether indexation applies to your holding, or whether the treaty limits what India may take. Those adjustments belong to the return. So the sum withheld is an advance measured on a partial view of your position, and the Indian return is where the real liability is worked out and any excess is claimed back.
Do I pay tax twice on Indian shares if I live in Canada?
Both returns look at the same disposal, but they do not compute the same number. India applies its holding period test, its deduction at source and its own relief, and the Indian return settles the Indian liability. Your Canadian return then reports the same sale on its own cost base, converted into Canadian dollars, and gives credit for Indian tax properly payable on that income. Relief comes through the credit rather than through either country standing aside. The practical work is making the two computations describe one transaction, so the credit claimed matches the tax the Indian return shows as due rather than the amount the fund happened to withhold.
How does the holding period change the tax on my Indian fund?
The holding period is what decides whether the gain is treated as long term or short term, and the two are computed differently. Deduction at source, though, is applied at the point of redemption by a payer working from its own record of when the units were allotted. Where units came from a switch, a merger of schemes, a transfer between accounts or a dividend reinvestment, that record and your own understanding of when you bought can differ. The return is where the holding period is actually established on evidence, so the allotment history behind each tranche of units is worth assembling before anything is redeemed.
Can I set an Indian share loss against a gain on another fund?
Set-off happens on the return, not at the point of payment. Each redemption is withheld on its own, as though it were your only transaction of the year, so a loss taken on one holding does nothing to reduce what is deducted on another. When the Indian return is prepared the year is looked at as a whole, losses are applied against gains of the character the rules allow, and what cannot be used is carried forward. That is also why contract notes and statements for the losing trades matter as much as for the profitable ones. Without them the loss exists in your bank account but not in the file.
How do I claim back tax deducted on an NRI redemption?
Through the Indian return. You establish the cost and the holding period for each tranche of units, compute the gain that actually arose, apply losses and any relief available, and the difference between that liability and what was withheld is claimed as a refund. It needs an Indian tax account, a bank account the refund can be paid into, and the deduction credited to you rather than sitting unmatched. For redemptions still to come, an application can be made in advance for deduction at a lower rate, which stops the same money being held back a second time while the previous refund is still working its way through.
What cost do I use for Indian shares on my Canadian return?
Its own. The Canadian computation takes your cost in Canadian dollars, measured when the shares or units were acquired, against proceeds in Canadian dollars measured when they were sold. Indian indexation does not carry across, and neither does the Indian characterisation of the holding. Because the currency has moved between those two dates, the gain reported in Canada will not equal the gain the Indian return shows, and sometimes the two differ in direction. That difference is normal and expected. What matters is that both figures are supported, and that the foreign credit is claimed against the Indian tax attributable to the income Canada is taxing.
How is foreign tax credit claimed in India?
By furnishing Form 67 with proof of the foreign tax — the certificate or statement from the other country's authority or payer — and by relieving the income under the specific DTAA article rather than generally. The credit is limited to the Indian tax on that income, and it is computed source by source rather than in one pool. The deadline for furnishing Form 67 has been amended more than once, so we confirm it for the year rather than assume. See foreign tax credit in India.
Is dividend income from Indian shares taxable for an NRI?
Yes. Dividends are taxed in the shareholder's hands, and the paying company withholds on payment to a non-resident. The treaty can reduce that withholding, but only if the documents are with the company before it pays: a tax residency certificate from your country, Form 10F, and a PAN on the register. Without them the domestic rate applies and your route back to the difference is a refund claim on an Indian return. See residency certificates and Form 10F.
