Canada: Form T1135, income, gains and the foreign tax credit
Canada has no PFIC regime, but Canadian residents with Indian funds still report. Here is when Form T1135 is due, how income and gains are reported, and how Indian tax is credited.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on November 5, 2026.
Canada has no PFIC regime: no Form 8621, no excess distribution tax. Canadian residents with Indian funds still report Form T1135 when the cost of foreign property tops CAD 100,000, plus income and gains on the T1. Our Hundred-Thousand Trip Log tracks the line. Your Canadian CPA files the return; we work alongside. See the countries guide.
- T1135 is due once the total cost of specified foreign property (not its market value) exceeded CAD 100,000 at any time in the year.
- Part A (simplified) suits a cost below CAD 250,000 throughout the year, and Part B (detailed) applies from CAD 250,000.
- It is due with the T1: April 30, 2026 (tax year 2025) and April 30, 2027 (tax year 2026), or June 15 if self-employed.
The numbers
| Item | Rule | Tax year |
|---|---|---|
| T1135 test | Total cost above CAD 100,000 at any point | 2025, 2026 |
| Late filing | CAD 25 a day for up to 100 days, to CAD 2,500 | Current |
| Knowing failure | CAD 500 a month to 24 months (CAD 12,000), then 5% of cost | Current |
| False statement | 5% of cost or CAD 24,000, whichever is greater | Current |
| Capital gains | One half taxable; the two-thirds plan was cancelled | 2025, 2026 |
Forms and rates change. We could not find Federal Budget 2026, due on November 5, 2026, online at our last check.
An invented example
Anita, in Ontario since 2019, holds this in tax year 2025:
| Holding | Cost in CAD |
|---|---|
| Scheme A units | 52,500 |
| Scheme B units | 32,600 |
| NRO savings peak, INR 1,200,000 x 0.01605 | 19,260 |
| Total | 104,360 |
That tops CAD 100,000, so T1135 is due April 30, 2026, with Part A. If a third scheme at a cost of CAD 150,100 were also held all year, the total would be CAD 254,460 and Part B would apply.
Income, gains and credit
- Our reading: a redemption or switch is a sale on Schedule 3, while IDCW (dividend-option payouts) is property income from abroad that carries no dividend tax credit.
- A running SIP (systematic investment plan) can cause a denied loss, which happens when identical units are bought within 30 days before or after the sale and are still held.
- The credit (T2209) is the lesser of Indian tax paid and Canadian tax on that income. For property income, foreign tax counts only up to 15% of the income.
- Residents of Quebec also file form TP-1079.8.BE-V once costs go over that same CAD 100,000 line.
Our checklist
The Hundred-Thousand Trip Log:
- Record each purchase date, rupee amount and Bank of Canada rate; the dollar cost is what counts.
- Record the highest month-end total cost of all foreign property.
- Record each payout and redemption in dollars, with Indian tax withheld.
- Record unit price and rate on the day you became resident.
Common questions
Does Canada tax unsold growth each year?
Not as a general rule. Tax arises on payouts and sales, with narrow exceptions in [offshore fund and trust rules](/indian-mutual-funds/countries/canada-offshore-fund-and-trust-rules/).
Is a Canadian fund holding Indian assets reported on Form T1135?
No. Specified foreign property does not include a Canadian mutual fund trust.
What if T1135 was missed in earlier years?
File late and ask CRA in writing to cancel penalties, or consider the Voluntary Disclosures Program. Reassessment can reach 6 years back when foreign income was also left out. See [exchange rate effects](/indian-mutual-funds/basics/exchange-rate-effects/) and our [Indian CPA page](/indian-cpa/).
Official sources
- CRA: Form T1135, Foreign Income Verification Statement
- CRA: Questions and answers about Form T1135
- CRA: Form T1135 with instructions (T1135 E 23)
- CRA: Penalties for foreign reporting
- CRA: T4037 Capital Gains
- CRA: Income Tax Folio S5-F2-C1, Foreign Tax Credit
- Bank of Canada: INR to CAD annual average rates
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