Do I pay Indian inheritance tax on my father's flat?
India does not levy an inheritance tax, so the succession itself does not produce a tax bill there. That is exactly why heirs living abroad get caught out. The tax arrives later, and in three places: on the rent while you hold the property, on the gain when you sell it, and at the point you try to move the money out of the country. Each of those has its own paperwork and its own deduction at source. So treat a clean succession as the start of the compliance work rather than the end of it, and get the ownership records and succession documents in order while the family paperwork is still to hand.
What cost do I use when I sell inherited property in India?
For Indian gains purposes you step into the previous owner's position rather than starting fresh. The original cost carried forward is what the gain is measured against, which means the deceased's purchase documents matter to you long after their death. Where the property was bought many years ago, or was inherited by them in turn, that chain has to be traced back. Note that this is the opposite of the Canadian treatment, where the asset is taken at its value at death. The same sale is therefore measured from two different starting points, and both computations have to be prepared together if the credit for Indian tax is going to hold up.
Does my father's ownership period count towards my holding period?
It does. The holding period runs from when the property was originally acquired rather than from the date you inherited it, so a flat your father held for many years does not become a fresh short holding in your hands. That matters because the character of the gain, and the mechanics available on it, turn on how long the property has been held rather than on who held it. Keep the original purchase deed, any improvement records and the succession documents together as one file. Reconstructing a holding period from memory while a buyer is already waiting is the expensive way to do this.
How is rent from an inherited Indian property taxed?
The rent is Indian-source income and is taxable in India, with tax deducted at source before it reaches you where the tenant or paying agent is obliged to deduct. It is also taxable in Canada, because you are taxable here on your worldwide income, with credit for the Indian tax on the same income. The two computations do not match: the deductions allowed against rent differ, the tax years differ, and the currency has to be translated. Filing in India is what turns the deduction at source into a settled liability and gives you the evidence the Canadian credit claim rests on.
Can I remit the sale proceeds from India to Canada?
Generally yes, through the banking channel, but the bank will not move the money on your word that the tax has been dealt with. A remittance out of India needs a declaration from the remitter and, in most cases, a certificate from an accountant confirming the nature of the sum and the tax position behind it. That certificate is the bottleneck. It cannot be produced without the succession documents, the cost history and evidence of the tax on the gain, which is why remittances stall for weeks after an otherwise clean sale. Assemble that file before the sale closes, not once the buyer's funds have landed.
Why does my bank want an accountant's certificate for the transfer?
Because the bank is the point at which India checks that money leaving the country has been taxed. It is not making a judgement about your sale. It is relying on a certificate that states what the sum is and what has been withheld or paid on it, together with your own declaration as remitter. If the underlying position is not documented, through an unclear cost, a missing succession record or an unfiled Indian return, the certificate cannot be issued and the transfer does not happen. The practical consequence is that the tax work and the remittance work are one job, done in that order.
How is rental income from a foreign property taxed?
Twice over, then relieved. The country where the property sits taxes the rent — often by withholding on the gross amount, with an election available to file on the net result instead. Your residence country also taxes it, generally on net income under its own rules, and credits the foreign tax. Because the two countries compute "net" differently, the numbers rarely match without work. See the section 216 election.
What is a DTAA?
Double Taxation Avoidance Agreement — India's name for a tax treaty. It does the same work as any treaty: allocates taxing rights between India and the other country, caps Indian withholding on payments abroad, and sets out whether relief comes by exemption or by credit. To use one you generally need a tax residency certificate from the other country, Form 10F, and a PAN in the deductor's records. See DTAA relief between India and Canada.
