Canadian tax on tax-free income in India (Provident Fund, Gratuity)
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Posted on: 11-07-16 15:24:18
I'm new member & this is my first post. I tried searching for my query but could not find answer, hence creating a new topic.
I'm currently in India, have got Canadian PR & soon planning to re-locate to Canada. I've resigned from my company but yet to get "tax-free retiral" benefits in the form of Gratuity & Provident Fund.
The provident fund usually takes 2-3 months to settle. Hence my question is :
1. If I move to Canada now & I get provident fund amount credited to my account after I've moved to Canada, will it be taxable there? If not, then all is well!
2. But if it is taxable, then what is the best way to avoid taxation on this life long saving?
3. Should I relocate to Canada only after getting these funds credited to my account?
4. Or there is any LEGAL way that I relocate to Canada, make some necessary declarations & avoid paying tax on income that is essentially earned over my past service years & is not really new income?
I'll be very thankful if someone can guide me on this one.
Quote:
Originally posted by arvin2016
I'm new member & this is my first post. I tried searching for my query but could not find answer, hence creating a new topic.
I'm currently in India, have got Canadian PR & soon planning to re-locate to Canada. I've resigned from my company but yet to get "tax-free retiral" benefits in the form of Gratuity & Provident Fund.
The provident fund usually takes 2-3 months to settle. Hence my question is :
1. If I move to Canada now & I get provident fund amount credited to my account after .
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In this Immigration Process, there is a catch phrase that is known as "Deemed Disposition", which means that on the day that you land here (In Canada) you have sold the whole Kit and Caboodle off in India for the price that existed on that day.
NOW, you can sleep in peace. But they want taxes on the income that PPF will generate from that day forward. Mmm that will only give you a small snooze.
Just to give you a good example..: Say you own a property there that is approximately worth a Crore of uRpees, get it evaluated by a qualified appraiser for a value say 1.1 Crore on or about the day of departure and if you happen to sell it for that price at the end of the year, you go scot free. Does that help?
Quote:
Originally posted by arvin2016
I'm new member & this is my first post. I tried searching for my query but could not find answer, hence creating a new topic.
I'm currently in India, have got Canadian PR & soon planning to re-locate to Canada. I've resigned from my company but yet to get "tax-free retiral" benefits in the form of Gratuity & Provident Fund.
The provident fund usually takes 2-3 months to settle. Hence my question is :
2. But if it is taxable, then what is the best way to avoid taxation on this life long saving?
I'll be very thankful if someone can guide me on this one.
I am not a Tax adviser, but I do a lot of research for you and me too. So, I can only say let it stay on the other side of the POND and you keep paying taxes on the gains, because at best of times the returns here are not that good and if you feel that you can get a good return of 18-20%, let it stay there. You are better off paying the tax on the gains.
Also as time progresses, you can slowly swing a bit at a time into an investment here called the Tax Free Savings Account. (TFSA)
There is a caveat..: That investment there should be in a LONG TERM Investment to keep you out of trouble there. You also will become an NRI for yourself here in Canada. BUTT, there is always a Butt, the Indian Government there now is demanding a cut FIRST, even our of the LT Capital Gains and they are asking for a lot of Paper Work to go with it too. But trhere is system called DTAA that will give a small break here if you pay some tax there in India. (Six of one and Half a dozen of the other)
Hope this makes some sense.
--
Quote:
Originally posted by arvin2016
The provident fund usually takes 2-3 months to settle. Hence my question is :
3. Should I relocate to Canada only after getting these funds credited to my account?
4. Or there is any LEGAL way that I relocate to Canada, make some necessary declarations & avoid paying tax on income that is essentially earned over my past service years & is not really new income?
I'll be very thankful if someone can guide me on this one.
--
Drop in here tomorrow and enjoy the few warm days that you get during this time of the year and become a part of the CD group. Don't drag your entry into Canada for a few uRpees, it is not worth the paper it is printed upon.
Here is some materials for you to get to read and explore. Hope you have the time to do it. And after that you can fire a lot of questions and I will swing back at a later date and explain all of it to you and what my thoughts were at the time of posting them.
How is that for Help?
FH.
What is EEE, EET and ETE.. Do I have to know that?
http://www.livemint.com/Money/t1M2fHO8IDYDvgLnCPCsPP/Dejargoned-EEE-EET-ETE.html
ONE MORE Article on it..:
http://articles.economictimes.indiatimes.com/2010-02-20/news/28451937_1_savings-instrument-eet-ppf
I have no time to read this bill # 2009, but is provided to you for your reading and understanding.
http://www.prsindia.org/uploads/media/DTC%20Bill/Direct%20Taxes%20Code%20Bill%202009.pdf
xx
If you don't liquidate your PPF and it becomes a PENSION..
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/115/frgn/menu-eng.html
Pension and how to go about reporting the same. (You will know about it after you see a Tax return and the guide.
https://turbotax.community.intuit.ca/questions/886936-is-my-uk-state-pension-tax-exempt-how-do-i-report-it-and-other-uk-pensions-received-in-canada
Do You Need to Declare Income Earned From Sources Beyond Canada?
https://turbotax.intuit.ca/tax-resources/foreign-income/declaring-tax-income-from-foreign-sources.jsp
https://en.wikipedia.org/wiki/Income_taxes_in_Canada
http://retirehappy.ca/are-you-taking-advantage-of-the-pension/
http://www.cra-arc.gc.ca/treaties/
fh.
I doubt you will have multi-crore savings in India and yet be migrating here to work as day laborer. So I would say cash out all monies in India, bring it over, and pay one-time hefty tax on your cash to the Canadian Govt. Once you run out of these savings, and trust me it won't take long to do that, you will have to re-tune your mind and prepare for labor jobs.
If I did not make myself clear and if it did not make you all understand with the two words which are 'Deemed Disposition', I will go one step further in Simple English here, which is..
They consider that you SOLD EVERY ITEM OF VALUE ON THAT DAY and got it into liquid cash. After that if you invest that amount and make money or If it appreciates in Value, then you pay taxes on the GAINS from that day forward.
Deemed Disposition means that you sold everything, on the day you land here in Canada.
You can bring the whole amount of your holdings into Canada when ever you choose to do the same after landing here. It could be TONNES OF MONEY or a very small amount, what ever you want to do, it is your choice. I do not want to rule out even crores, if per chance you have that good a bank balance. But please declare all of it or make a list and provide it to the CBSA at the time of landing, so that they also know that you are well to do even before you got into Canada.
Take any job that you want to do and PROSPER. And
Good Luck.
FH.
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Quote:
Originally posted by GlobalIndian
I doubt you will have multi-crore savings in India and yet be migrating here to work as day laborer. So I would say cash out all monies in India, bring it over, and pay one-time hefty tax on your cash to the Canadian Govt. Once you run out of these savings, and trust me it won't take long to do that, you will have to re-tune your mind and prepare for labor jobs.
You can put a marked up figure of your assets abroad in your first return and maintain it in the future ones.
Say if you have 1 crore of assets , you may wish to declare them as 2 or 3 crores so that when you bring them at a later period and their value reaches 2-3 crores by then , you can get the money in Canada without attracting taxes as you had declared it in your IT returns here .
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Fido.
It is a great idea to push the prices up sky high if you can. Mmmm Only if it will hold water...!
When you get the same on a Letterhead from an OFFICIAL Appraiser and hang on to it dearly, then it will provide you with solid returns at the time of sale. You may have to twist his arm a bit and please don't twist it too much. It might break his arm and soon after that might get you into a lot of trouble.
So, be careful!
FH.
I was going through the Indian News Papers and I came across this item on taxation of PPF's and the Government's stand on the earnings in there. It may be of interest to you. Please see if it helps.
From Hindu.. : http://www.thehindu.com/business/Economy/ppf-remains-tax-exempt-revenue-secretary/article8298775.ece
Economic Times.. : http://economictimes.indiatimes.com/wealth/tax/budget-2016-makes-epf-taxable-nps-gets-tax-break/articleshow/51202386.cms
Tax Guru.. : http://taxguru.in/income-tax/tax-treatment-recognized-provident-fund-rpf-unrecognized-provident-fund-urpf-statutory-provident-fund-spf.html
Good Reading.
FH.
