Understanding tax residency between Canada and India is critical for individuals moving across borders. Your residency status determines how your income is taxed, what needs to be reported, and whether you may face double taxation.
Canada and India follow very different approaches. Canada focuses on residential ties and factual circumstances, while India applies day-count rules with an additional RNOR classification. Because of this, a correct analysis requires looking at both countries’ laws together along with the tax treaty.
Canadian residency status under CRA rules
Under Canadian tax law, the starting question is whether the individual is resident or non-resident of Canada for tax purposes. A Canadian resident is generally taxed on worldwide income, while a non-resident is generally taxed only on Canadian-source income. In addition, Canada can treat a person as a part-year resident, deemed resident, or deemed non-resident under treaty rules.
How Canada determines residence
CRA’s framework is mainly factual. The central question is whether the person has, in mind and in fact, settled into or maintained their ordinary mode of living in Canada. CRA looks at the whole picture, including the length and continuity of presence, the purpose of the stay, and, most importantly, the person’s residential ties with Canada.
The strongest significant ties are a dwelling place in Canada, a spouse or common-law partner in Canada, and dependants in Canada. Secondary ties can include Canadian bank accounts, health coverage, driver’s licence, memberships, employment or business ties, personal property, credit cards, RRSPs, and similar links. Secondary ties usually matter collectively rather than one by one.
Leaving Canada: when residence usually ends
When a person leaves Canada, CRA focuses on whether significant residential ties were actually severed. A temporary absence alone does not usually end Canadian residence if meaningful Canadian ties remain. The date of non-residency is normally the date on which residential ties are severed, often aligning with the latest of the date the individual leaves Canada, the date the spouse/dependants leave Canada, or the date residence is established in the new country.
A Canadian home is especially important. If a home remains available for the person’s own use in Canada, it is a strong tie. If it is rented out on arm’s-length terms, it may carry less weight, but the outcome still depends on the full facts.
Entering Canada: when residence usually begins
When a person enters Canada, the question is when Canadian residential ties were established. If the individual comes to Canada and sets up a home, brings family, and begins normal life here, Canadian residence can begin on the date of arrival. CRA also notes that landed immigrant status and provincial health coverage can be strong indicators that Canadian residence has started, except in unusual cases.
The 183-day rule in Canada: important, but often misunderstood
Canada does have a 183-day rule, but it is not the universal test for everyone. It applies mainly where a person is not already a factual resident, but sojourns in Canada for 183 days or more in a calendar year. In that case, the person can become a deemed resident of Canada for the entire year. In other words, 183 days matters, but Canadian residence is still not just a simple day-count system.
NR73 and NR74
Form NR73 is CRA’s form for individuals who have left or plan to leave Canada and want CRA’s opinion on their residency status. Form NR74 serves a similar role for individuals entering Canada. These forms can be useful fact-gathering tools, but they do not replace the legal analysis. CRA’s opinion depends on the facts disclosed and is not a binding substitute for the full law-and-treaty review.
Indian residency rules — Resident, RNOR, and NR
India determines tax residency separately for each financial year. The first question is whether the individual is Resident or Non-Resident under the statutory tests. If the person is Resident, the second question is whether they are Resident and Ordinarily Resident or Resident but Not Ordinarily Resident. This second layer is what makes India’s system especially important for returning NRIs and cross-border taxpayers.
How India determines resident status
An individual is generally Resident in India if either of the following is met: the person is in India for 182 days or more during the relevant financial year, or the person is in India for 60 days or more during that year and 365 days or more during the four immediately preceding years. However, there are important special rules. For an Indian citizen who leaves India in a relevant year for the purpose of employment outside India, or as a member of the crew of an Indian ship, the 60-day limb is effectively replaced by 182 days. For an Indian citizen or person of Indian origin who comes on a visit to India, the normal visiting rule is generally 182 days, but this can shift to 120 days where total income other than foreign-source income exceeds the statutory threshold of Rs. 15 lakh.
India also has a deemed resident rule for certain Indian citizens with specified Indian income above the threshold who are not liable to tax in any other country. That rule does not make the person an ordinary resident by default; it places them in the RNOR-type treatment bucket.