India’s DTAAs Prevent Double Taxation for Students in Canada, U.S.

(CANADA) Indian graduates who study in Canada and then take jobs in the United States on H‑1B visas are leaning on a web of tax treaties that has grown increasingly important as cross‑border careers become the norm. As they collect pay slips in two countries and keep bank accounts in a third, many ask the same question during their first filing season abroad: will the same income be taxed twice? The answer, under India’s network of Double Taxation Avoidance Agreements (DTAAs) and the U.S.–Canada Tax Convention, is no. Those agreements, read together, determine where income gets taxed and provide credits so the same money isn’t taxed again elsewhere.

The rules turn on:
– where a person is a tax resident in each year,
– what type of income is in question, and
– how the treaties’ relief provisions apply.

For Indian students who spent part of the year in Canada before moving to an H‑1B role in the United States, the framework is straightforward in principle but often messy in real life because calendars, visas, and payroll systems rarely line up neatly.

Typical path and how the treaties fit

A common sequence:
1. An Indian citizen studies in Canada, picks up part‑time work or a stipend, and becomes a Canadian tax resident for that period.
2. After graduating, they accept a U.S. job, cross the border, and meet the U.S. Substantial Presence Test (generally triggered after at least 183 days in the United States within a look‑back period).
3. Trips back to India remain short enough that the person stays a Non‑Resident Indian (NRI) or sometimes a Resident but Not Ordinarily Resident (RNOR), keeping India’s tax reach limited to India‑sourced income.

The treaties do the heavy lifting. The India–Canada DTAA (1996), the India–U.S. DTAA (1990), and the U.S.–Canada Tax Convention (1980, updated 2007) work together to:
– Eliminate double taxation,
– Allocate primary taxing rights in a given year or period, and
– Provide credit relief when the same income appears in more than one country.

How domestic rules interact with treaty rules

Each country begins with its own domestic law and residency tests:
– Canada: Looks at residential ties and day counts (generally 183 days) and taxes residents on worldwide income.
– United States: Applies the Substantial Presence Test, using a day‑weighted formula to determine whether a person is a U.S. tax resident who is taxed on worldwide income.
– India: Uses a 182‑day threshold or an alternative 60‑plus‑365 day test across years to decide if worldwide income is taxed.

When more than one country asserts residency, treaties provide tie‑breaker rules that consider:
– Permanent home,
– Centre of vital interests (personal and economic ties),
– Habitual abode.

In practice: an Indian graduate who studied in Toronto and then started an H‑1B job in Seattle will generally be a Canadian tax resident while studying, a U.S. tax resident while working, and non‑resident in India throughout—so the global income for each period is taxed once in the country of residence and not again in India.

Treaty provisions that provide relief

Key treaty articles:
– India–Canada DTAA — Article 23: Credit method permitting a resident state to grant a credit for tax paid in the other state to prevent double taxation.
– India–U.S. DTAA — Article 25: Similar credit provision to avoid taxing the same item of income twice.
– U.S.–Canada Tax Convention — Article XXIV: Allocates taxing rights between the U.S. and Canada and provides credits to eliminate double taxation for amounts touching both countries in a year.

According to analysis by VisaVerge.com, these three agreements form a triangle of protection covering the typical campus‑to‑career path for Indian nationals moving from Canada to the United States on H‑1B visas.

Lived experience: study income, work income, and India’s role

During study:
– Many students earn modest amounts from assistantships, hourly campus jobs, or stipends.
– That income is taxed in Canada when the student is a Canadian tax resident.

After moving to the U.S.:
– U.S. salary and bonuses are taxed in the United States once the Substantial Presence Test is met.
– India’s reach remains limited as long as travel days to India keep the person an NRI or RNOR.

Because the treaties coordinate positions:
– A stipend taxed in Canada isn’t taxed again in the U.S. after the move.
– A U.S. wage taxed in the U.S. isn’t taxed again in Canada after departure.
– Each country taxes income for the period when the person is resident there; treaties prevent overlap.

Concrete numeric example

• Student earns CAD 10,000 in Canada during studies.
• Later earns USD 80,000 in the U.S. on an H‑1B.
• Travel to India stays below 182 days in both years.

Outcome:
– Canada taxes the CAD 10,000 during the study period.
– U.S. taxes the USD 80,000 after Substantial Presence is met.
– India taxes only India‑sourced income (for example, small interest from a non‑resident Indian bank account).
– Treaty provisions and credits prevent any double taxation on the same income.

Residency and day counts — the hinge of the system

Residency tests are strict and determinative:
– Canada: Residential ties or presence of ≥183 days → worldwide income taxed.
– United States: Substantial Presence Test → day‑weighted 183‑day threshold across years → worldwide income taxed.
– India: 182‑day rule or 60 + 365 test → determines whether India taxes worldwide income.

When multiple countries claim residency, treaties use tie‑breakers to set a single treaty residence and prevent double taxation.

Compliance: paperwork, forms, and certificates

Treaty relief usually requires documentation:
– Tax Residency Certificate: a common cross‑border request.
– U.S. proof: IRS Form 6166 — see Form 6166 – Certification of U.S. Tax Residency.
– Canada proof: Canada Revenue Agency residency certificate — see Residency certificates.
– India: Claiming treaty relief typically requires a Tax Residency Certificate from the other country and Form 10F — see Form 10F (Rule 21AB).
– Keep certificates current and matching the period for which treaty relief is claimed.

Common tax forms to expect:
– Canada: T4 slips and T1 return during study.
– United States: Form W‑2 and Form 1040 in the first U.S. year — see Form W‑2 and Form 1040.
– India: If filing due to India‑sourced income, foreign tax credit flows through Schedule TR of the Indian return.

The treaty credit mechanisms (Article 23 for India–Canada, Article 25 for India–U.S., and Article XXIV for U.S.–Canada) resolve duplicate entries so the final tax burden aligns with treaty allocation.

Transition year issues and coordination

The transition year is often the trickiest because:
– Jobs start mid‑year,
– Academic calendars end in spring,
– Payroll and withholding can lag.

Common practices:
– File a departure (final) Canadian return to mark change of residency.
– Enter the U.S. system mid‑year if Substantial Presence Test is met.
– Use Article XXIV of the U.S.–Canada Convention to eliminate double taxation for overlapping income between the two countries.

The goal is not to erase tax, but to prevent a second charge on the same dollar. Coordinating residency and employer withholding with treaty positions reduces later adjustments, refunds, and administrative hassle.

Indian position and day counts

India’s tax reach is limited if time in India remains below thresholds:
– Stay <182 days → remain NRI or possibly RNOR.
– In both cases, India taxes only India‑sourced income (e.g., interest from an Indian non‑resident account).
– Day counts therefore decide when treaty provisions apply and whether India steps in.

Practical missteps to avoid

• Failing to file an exit/departure return in Canada → CRA may continue to treat the person as a resident.
• Overlooking Canadian account interest after moving to the U.S. (including interest from tax‑free savings accounts) → may be reportable on the first U.S. return.
• Claiming treaty relief in India without a Tax Residency Certificate or failing to submit Form 10F → delays or denial of relief.

These errors do not alter treaty outcomes legally but add time, cost, and paperwork.

Case study — Aditi’s multi‑year path

• Aditi, an Indian citizen, studies at the University of Toronto for two years and earns CAD 15,000 per year from part‑time work.
  • She’s a Canadian tax resident and pays Canadian tax on those earnings.
  • India taxes only small Indian‑sourced income (e.g., bank interest), and the India–Canada DTAA prevents double taxation.
• After graduation, she moves to the U.S. on H‑1B, meets the Substantial Presence Test, and becomes a U.S. tax resident.
  • She pays U.S. tax on worldwide income from that point.
  • India–U.S. DTAA prevents any second layer of tax in India on the same income.
  • U.S.–Canada Convention coordinates any overlap during her transition year with credits for taxes paid to the other side.

Result: She pays once in each country for the income earned there; treaty credits address any cross‑border duplication on paper.

Practical takeaways

Keep careful records and track days: day counts decide residency; residency decides who taxes worldwide income; treaty provisions decide which country backs off when two rules touch the same income.

Steps to reduce friction:
– Maintain copies of Canadian T4s and U.S. W‑2s and match them to the relevant residency periods.
– Obtain and preserve Tax Residency Certificates (IRS Form 6166 and CRA residency certificates) and Form 10F for India.
– File departure/arrival returns as required and check employer withholding for alignment with treaty positions.
– Use foreign tax credit lines (Schedule TR in India and the appropriate credit lines in Canada/U.S. returns) when duplicate entries appear.

Final perspective

The treaty network does not favor any one country; it recognizes mobility and aligns taxing rights year by year:
– Canada taxes Canadian income during study,
– United States taxes U.S. income after the move,
– India taxes only India‑sourced income when the person remains an NRI or RNOR.

The three treaties — India–Canada, India–United States, and United States–Canada — work together to ensure the same income is not taxed twice and to grant credits when timing and withholding cause overlaps. The language may be technical, but the practical effect is simple and tangible: each dollar is taxed once, in the country entitled to it under residency and treaty rules, and the triangle of treaties keeps those lines clean even when transitions happen mid‑year.