(AUSTRALIA) — the tax rule that changes everything for nris abroad is this: australia and canada tax mainly based on residency, while the United States can tax based on citizenship and green card status even after you leave.
For tax year 2026 (returns filed in 2027), this distinction drives what income you report, which country gets first taxing rights, and how well a DTAA prevents double taxation.
For many NRIs, it also determines whether Indian mutual funds feel “normal” (Australia/Canada) or become a U.S. reporting headache.
Below is a practical comparison for NRIs who live in Australia or Canada, invest in India, and want a quick U.S. perspective for cross-border families.
Australia vs Canada vs U.S.: the side-by-side view NRIs need
| Topic | Australia | Canada | United States |
|---|---|---|---|
| Primary basis of taxation | Residency-based | Residency-based | Citizenship-based (plus green card and Substantial Presence Test) |
| If you are a tax resident | Report worldwide income | Report worldwide income | Report worldwide income |
| If you are a nonresident | Mostly Australian-source income | Mostly Canadian-source income | Nonresident aliens report mostly U.S.-source income (Form 1040-NR) |
| Indian mutual funds | No U.S.-style PFIC regime | No U.S.-style PFIC regime | Often treated as PFICs (Form 8621) |
| Retirement-style shelters | Superannuation | RRSP / TFSA | Limited; employer plans exist, but cross-border treatment varies |
| Treaty relief effectiveness | High for many common items | High for many common items | Often helpful, but U.S. anti-deferral and reporting rules can still bite |
| Compliance burden (for Indian assets) | Medium | Medium | Very high (FBAR, FATCA, PFIC, foreign gifts, entities) |
Why U.S. shows up in an article for NRIs in Australia and Canada: many families have a U.S. spouse, a prior U.S. work stint, or a future U.S. move. The U.S. system is the outlier.
IRS anchor points (U.S. only): residency tests and filing rules are in IRS Publication 519 (U.S. Tax Guide for Aliens) at irs.gov/pub/irs-pdf/p519.pdf, with international basics at irs.gov/individuals/international-taxpayers.
1) NRIs in Australia — tax-efficient planning that stays compliant
Australia generally taxes by tax residency. Residents usually report worldwide income. Nonresidents generally report only Australian-source income.
That is why residency tracking matters.
For NRIs investing back in India, the India–Australia DTAA typically helps in two ways:
- It can reduce Indian withholding on certain income, when documented.
- It can allow a foreign tax credit in Australia for Indian tax paid, when Australia taxes the same item.
Practical strategies Australians commonly use
Use NRE and NRO accounts correctly.
- NRE account interest is generally tax-free in India and repatriable.
- NRO account interest is generally taxable in India, with DTAA relief often available in Australia through credits.
Example (simple numbers):
You earn the equivalent of ₹200,000 of NRO interest in 2026. India withholds tax.
If Australia taxes that interest because you are an Australian tax resident, you generally look to claim credit so the same income is not taxed twice.
Indian equities and mutual funds are usually workable. Australia does not impose U.S.-style PFIC reporting on Indian funds. That often makes long-term India investing simpler than it is for U.S. persons.
Capital gains planning still matters. If you are an Australian tax resident, Indian capital gains may be taxable in Australia. The DTAA can allow credit for Indian taxes paid on the same gain.
Superannuation is a core lever, but not an “India investing” tool. Employer contributions and concessional tax treatment can make super a major long-term benefit. It is typically separate from how you hold Indian assets.
⚠️ Warning: A common mistake is assuming “tax-free in India” means “not reportable in Australia.” If Australia treats you as a resident, it may still tax that income.
Who should be extra cautious in Australia
- Short-term residents planning to exit soon.
- People using trusts or offshore entities.
- Anyone moving between countries mid-year, creating split-year reporting.
2) NRIs in Canada — where registered accounts change the math
Canada also taxes based on residency. Canadian residents generally report worldwide income. Nonresidents generally report Canadian-source income.
The India–Canada DTAA is a major tool for avoiding double taxation.
Practical strategies Canadians commonly use
Use registered accounts as your primary Canadian tax shelter.
- RRSP: contributions can reduce taxable income, and growth is tax-deferred.
- TFSA: growth and withdrawals are generally tax-free in Canada.
India does not automatically treat TFSA growth as tax-free. Coordination matters if you keep Indian-source income streams.
Example (simple numbers):
You contribute CAD $10,000 to an RRSP during 2026, and your marginal rate is 30%. The contribution may reduce Canadian tax by about CAD $3,000. The exact impact depends on your income and province.
Indian investments are usually “normal,” but track your numbers carefully. Canada typically taxes foreign investments under standard rules.
But you must track: cost base, currency conversion effects, dividends and capital gains reporting.
Rental income from India needs two-country reporting.
- India taxes the rent first (often via TDS or assessment).
- Canada requires reporting of the rental income.
- DTAA foreign tax credits often reduce double taxation.
Canada also uses a capital gains inclusion rate of 50% for many taxpayers. That can make timing sales and realizing gains in lower-income years meaningful.
Who should be extra cautious in Canada
- High earners near the top brackets.
- People ignoring FX impacts on gains.
- Anyone who forgets foreign reporting for accounts and assets.
3) A quick U.S. perspective for NRIs: why Americans abroad have a different problem
If you are a U.S. citizen or green card holder, the U.S. generally expects a return reporting worldwide income even if you live in Australia or Canada.
If you are an NRI who later moves to the U.S. on a visa, U.S. residency for tax can start under the Substantial Presence Test. IRS Publication 519 explains this test and the dual-status rules.
Visa-specific note: H-1B and FICA
Many new U.S. residents arrive on H-1B. Once you are a U.S. tax resident, your wages are generally subject to U.S. federal income tax withholding, and FICA taxes (Social Security and Medicare).
In contrast, many F-1 students (within their exempt years) can be exempt from FICA. The details depend on status and time in the U.S.
The U.S. “extra forms” that surprise new immigrants
If you become a U.S. tax resident, Indian financial ties can trigger:
- FBAR (FinCEN Form 114) if foreign accounts exceed $10,000 aggregate at any time during the year.
- Form 8938 (FATCA) for specified foreign financial assets above thresholds.
For context, common Form 8938 thresholds include $50,000 (end of year) or $75,000 (any time) for single filers living in the U.S. Higher thresholds apply for married filers and those living abroad.
| Filing Status (living in U.S.) | FBAR Threshold | Form 8938 (End of Year) | Form 8938 (Any Time) |
|---|---|---|---|
| Single | $10,000 aggregate | $50,000 | $75,000 |
| Married filing jointly | $10,000 aggregate | $100,000 | $150,000 |
📅 Deadline Alert: For tax year 2026, FBAR is due April 15, 2027, with an automatic extension to October 15, 2027. The IRS income tax return is generally due April 15, 2027. See irs.gov/forms-pubs.
4) India-specific tax benefits NRIs can use regardless of host country
These points apply whether you live in Australia, Canada, or later move to the U.S.
Bank accounts: NRE vs NRO
- NRE interest is generally exempt from Indian tax and fully repatriable.
- NRO interest is generally taxable in India. DTAA may help reduce double tax in Australia or Canada.
Indian equities and mutual funds: know the capital gains buckets
As stated in the source framework:
- Short-term gains are generally taxed at slab rates.
- Long-term capital gains on equity held over 1 year are described here as 12.5% post-July 2024.
If you have any U.S. person in the family, remember the U.S. can treat many non-U.S. funds as PFICs. Australia and Canada do not use that PFIC regime.
DTAA paperwork: reduce TDS and support foreign tax credits
To claim treaty relief cleanly, NRIs commonly need:
- TRC (Tax Residency Certificate) from the host country, and
- Form 10F for Indian payer documentation when required.
Missing documentation is a frequent reason banks apply higher withholding.
India filing timing
If you need a refund of Indian TDS, filing an Indian return may be required. The commonly cited individual due date is July 31 (subject to India’s annual changes and extensions).
India residency watch: April 1, 2026 change flagged in planning
Planning becomes more sensitive around April 1, 2026, especially for higher-income NRIs with Indian income over ₹15 lakh and 120+ days in India. Track days carefully and confirm status with an Indian CA.
5) Common DTAA mistakes NRIs make (and how to avoid them)
- Treaty benefits without documentation. Fix: keep TRC and complete Form 10F early in the year.
- Mixing NRE and NRO funds. Fix: keep a clean audit trail. Use separate accounts and clear remittance records.
- Ignoring host-country residency rules. Fix: residency drives worldwide reporting in Australia and Canada. Track arrival and departure dates.
- Assuming “no tax in India” means “no reporting abroad.” Fix: Australian and Canadian residents often still report worldwide income.
- Moving to the U.S. and keeping India funds without U.S. planning. Fix: before U.S. tax residency starts, review PFIC exposure and FBAR/FATCA rules. Use IRS Publication 519 as the starting point.
You are “Australia-based,” “Canada-based,” or “U.S.-exposed” if…
You are Australia-based if you are treated as an Australian tax resident, and your main planning levers are residency status, NRE/NRO structure, and superannuation.
You are Canada-based if you are treated as a Canadian tax resident, and your main planning levers are RRSP/TFSA, careful FX tracking, and DTAA credits for Indian tax.
You are U.S.-exposed if you are a U.S. citizen, green card holder, or you meet the Substantial Presence Test for tax year 2026. In that case, plan for worldwide income reporting, FBAR, Form 8938, and possible PFIC (Form 8621) issues.
Action items for tax year 2026 (filed in 2027):
- Collect Indian TDS certificates and keep NRE/NRO records separated.
- Secure TRC and complete Form 10F where needed for DTAA relief.
- If a U.S. move is possible, review IRS Publication 519 and foreign reporting thresholds before year-end.
⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.
This guide compares tax implications for NRIs in Australia, Canada, and the U.S. It highlights that while Australia and Canada focus on residency, the U.S. tracks citizens worldwide. Key differences include the treatment of Indian mutual funds and the specific reporting forms required, such as FBAR for Americans. It emphasizes using DTAAs and maintaining proper documentation like Form 10F to optimize cross-border financial planning.
