Pls help with declaring interest on fixed deposits in India
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Hi. We immigrated to Canada last year. This is our first year filing taxes in Canada and so I'd appreciate any help you guys can give us.
I'm using Studio Tax 2014 and everything is straightforward so far. The only thing is, I'm not sure how exactly to report the interest we earned (and the taxes withheld) on our fixed deposits on india.
So my questions are:
1-Is it as simple as reporting the interest in CAD on line 121 and deducting the foreign tax credit on line 405?
I am finding that this increases our tax burden in Canada significantly since we only get credit for 15% of the total interest but our marginal tax bracket is higher than 15%. Did I do something wrong?
2-Are there any items in the tax treaty with India that can save tax for us? This money was earned in India while we lived there so it isn't an NRE account. I tried to read the treaty and it does not seem to apply to ordinary FDs with the state bank.
Thanks.
Avni.
Location: Western Hemisphere
Posted on: 29-04-15 12:23:48
First of all, any income earned prior to you becoming a resident of Canada (tax resident) need not be reported.
Second, foreign interest and dividends are reported as investment income on line 121 while foreign capital gains are treated as regular investment income, but reported on line 130. You may use a separate sheet of paper to itemize these numbers if there are more than what line 121 can fit.
Foreign tax credit is not as simple as it should be. You'll have to calculate both the federal and provincial tax credits separately. There are two attachments - T2209 and T2036. Each have their own means of calculations.
What you have to do is declare all the income (at its respective exchange rates) and calculate the net income and other deductions. Then you'll have to fill out the tax credit attachments which will provide you the amount that can be claimed as a foreign tax credit.
Unfortunately, if you are doing it for the first time, it is utterly confusing and the tax softwares do not handle them very well. You may want to consult with a tax professional.
It is all the more confusing when only a part of the income is foreign income.
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Dimple2001
Thanks Dimple. That is very helpful. Can you recommend someone who does this professionally at reasonable rates? I'm in the GTA.
Thanks.
Avni
Location: God's own country
Posted on: 29-04-15 15:03:25
Check in the Dundas Hurontario intersection of Mississauga at the Newin Centre. Lot of Indian tax people there. Personal recommendation may be given by some CD members too....
Murali
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I am a Gents and not a Ladies.
Quote:
Originally posted by Avni
Hi. We immigrated to Canada last year. This is our first year filing taxes in Canada and so I'd appreciate any help you guys can give us.
I'm using Studio Tax 2014 and everything is straightforward so far. The only thing is, I'm not sure how exactly to report the interest we earned (and the taxes withheld) on our fixed deposits on india.
So my questions are:
1-Is it as simple as reporting the interest in CAD on line 121 and deducting the foreign tax credit on line 405?
I am finding that this increases our tax burden in Canada significantly since we only get credit for 15% of the total interest but our marginal tax bracket is higher than 15%. Did I do something wrong?
2-Are there any items in the tax treaty with India that can save tax for us? This money was earned in India while we lived there so it isn't an NRE account. I tried to read the treaty and it does not seem to apply to ordinary FDs with the state bank.
Thanks.
Avni.
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You have proper guidance from the other posters to complete your tax return up above.
They have extended the filing date to 5th of May 2015 for the last years return. So, you can breathe a little easier.
Here are a few questions to you. Did you tell the Bank that you are leaving India and becoming an NRI, when you went there to pull a few bucks to take with you? Did they tell you that they will not deduct the TAX on the money in DEPOSIT there with them? You have a day or two to do that. That will save you the 15%. Even if they did take the withholding tax, you can file a return and claim it back.
Now to the nitty gritty, The Tax year runs from 1st January of each year to the 31st December of that year here in Canada. So, you will have to calculate the interest (Approximate will do) Then divide it by 52 (52 Urpees to a Canadian Looney) That will get you the Dollars that you want to report. This is calculated from your date of entry to the 31st December, NOT FOR THE WHOLE YEAR. So, you multiply it by x/365 to get the reporting amount. 'x' stands for the number of days from the date of entry to the end of the year. Count each one of them.
Once you get the dollar amount, make a copy of your calculation sheet on a separate paper and attach the same to the TAX RETURN. Tell them it for the interest income from overseas. Don't worry about the taxes and the foreign income sheet. Unless it is in crores, I will leave it for another day.
Later on if you find that you are going to get a few dollars back, you can always go to the tax filers and send another amendment to them. They will adjust the same and send you a few bucks back.
If you need guidance in paper filing we all are here. NONE Of the TAX programs except those that cost a HUNGRED DOLLARS or MORE will be able to handle that. I have yet to see one there on the market.
FH.
http://globalnews.ca/news/1965575/canada-revenue-agency-gives-until-may-5-to-file-taxes-following-error/
Quote:
Originally posted by Avni
Hi. We immigrated to Canada last year. This is our first year filing taxes in Canada and so I'd appreciate any help you guys can give us.
I'm using Studio Tax 2014 and everything is straightforward so far. The only thing is, I'm not sure how exactly to report the interest we earned (and the taxes withheld) on our fixed deposits on india.
So my questions are:
1-Is it as simple as reporting the interest in CAD on line 121 and deducting the foreign tax credit on line 405?
I am finding that this increases our tax burden in Canada significantly since we only get credit for 15% of the total interest but our marginal tax bracket is higher than 15%. Did I do something wrong?
2-Are there any items in the tax treaty with India that can save tax for us? This money was earned in India while we lived there so it isn't an NRE account. I tried to read the treaty and it does not seem to apply to ordinary FDs with the state bank.
Thanks.
Avni.
Do NOT report anything related to India to CRA.
Canada didn't help you earn or save anything related to India , prior to coming here..its your own hard earned money.
Just whatever you earned over here or whatever interest you got over here in Canada , only report that.
Don't go out of the way & unnecessarily report things that you don't have to, you will only create further issues for you ..sometimes over honesty is bad for you.
Location: God's own country
Posted on: 30-04-15 08:35:19
I agree.
Donot open the can of worms.
It is best to leave something annonymnous.
Murali
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I am a Gents and not a Ladies.
