Mohali Home Rented Out Counts Toward Canada's T1135 Limit मोहाली में किराये पर दिया घर कनाडा के विदेशी संपत्ति फ़ॉर्म की सीमा में गिना जाता है ਮੋਹਾਲੀ ਵਿੱਚ ਕਿਰਾਏ ਉੱਤੇ ਦਿੱਤਾ ਘਰ ਕੈਨੇਡਾ ਦੇ ਵਿਦੇਸ਼ੀ ਜਾਇਦਾਦ ਫਾਰਮ ਦੀ ਹੱਦ ਵਿੱਚ ਗਿਣਿਆ ਜਾਂਦਾ ਹੈ

A family in Brampton or Surrey owns a flat in Mohali. It was bought years ago, before the move to Canada. A tenant now lives in it and pays rent into an Indian bank account. Each spring the Canadian tax return asks whether the owner held foreign property above a set amount. The Mohali flat is a home in India, and many owners wonder whether a home counts at all.

The Canada Revenue Agency's answer turns on two things. One is how the flat is used. The other is what it cost. A Mohali home that is rented out to earn a profit is foreign property for the Canadian form. A home kept mainly for the family's own use is left out. This piece reads the federal Income Tax Act and the agency's own guidance pages on the form, and sets out what they say.

Why this question exists only for an owner in Canada

The reporting duty sits in section two hundred and thirty three point three of the Income Tax Act. It applies to a "specified Canadian entity", and for an individual that means a taxpayer resident in Canada in the year. An owner who lives in Mohali never meets it. The question arises only because the owner has become resident in Canada while the home stays in Punjab.

The form is the Foreign Income Verification Statement, Form T eleven thirty five. The agency says the reporting duty is meant to improve compliance with the rules on foreign income, and to give it information to check that compliance.

What the Act counts as specified foreign property

The Act defines "specified foreign property" as a list. Paragraph b of that list covers tangible property situated outside Canada. A flat in Sector Seventy or a plot in Kharar is tangible property, and it is situated outside Canada. Paragraph a covers "funds or intangible property" that are "situated, deposited or held outside Canada".

The same definition then lists what it does not include. Paragraph p leaves out "personal-use property of the person or partnership". Paragraph j leaves out property used or held exclusively in carrying on an active business. Both exclusions are written into the definition itself, so a property caught by either one never counts towards the limit.

The one hundred thousand dollar test in the agency's words

The agency's page on the Foreign Income Verification Statement says the form has to be filed by "Canadian resident individuals, corporations, and certain trusts that, at any time during the year, own specified foreign property costing more than" one hundred thousand dollars. The agency prints that figure in numerals, and the amount is in Canadian dollars. The Act puts the same test as a total: a resident taxpayer becomes a reporting entity where, at any time in the year, the total of the cost amounts of all its specified foreign property exceeds that sum.

Three points follow from the words. The test adds up every item of specified foreign property, and the agency's own example joins shares abroad with a bank deposit abroad to cross the line. The test looks at any moment in the year, and the agency says an owner who crossed the line during the year still reports every such property held in the year, even after a sale. Crossing the line also brings no tax by itself. The agency says resident taxpayers report all income earned from foreign property whatever its cost, and the form is a separate duty on top of that.

Cost, not market value

The test uses cost amount. The agency answers the point directly: the threshold is based on the cost amount, which is defined in the Act and "generally is the adjusted cost base and not the fair market value". A Mohali flat that has risen in value since purchase is measured by what it cost under the Act's rules. What it would fetch today does not enter the test.

The agency also deals with a home bought on a loan. In its example, an owner buys a property abroad with a small down payment and a mortgage for the rest. The agency says the form is still required, because the cost amount is the full purchase price and not the down payment. For a Mohali flat bought with a bank loan, the measure is the whole cost.

A rented Mohali home counts and a home kept for family use does not

The agency's guidance turns on personal-use property. Its answer reads: "Personal-use property is generally defined as property owned by the taxpayer that he or she or a related party uses primarily for personal or enjoyment purposes." It adds that it "takes the view that 'primarily' means more than" half, and that the answer in any case is "a question of fact that is determined on a case-by-case basis".

The agency then works through a condominium in Florida in several situations. A condominium used only as the owner's holiday home is personal-use property and stays off the form. Where it is rented out for eight months of the year with a reasonable expectation of profit and kept for personal use for the other four months, it "is not held primarily for personal use or enjoyment", so it is specified foreign property and is reported. Where it is rented for part of the year without a reasonable expectation of profit, only to recover some of the running costs, the agency treats it as personal-use property.

The same reading carries across to Mohali. A flat let to a tenant on a rental agreement, with the rent coming in month after month, sits on the reported side of that line. A home kept for the owner's own visits sits on the other side. The definition in section fifty four of the Act also covers use by "a person related to the taxpayer". On that wording, a home lived in by the owner's own parents may fall within personal use. The agency's guidance does not say this directly. Which side a particular home is on is the question of fact the agency describes.

A building with several units is weighed as a whole. In the agency's example, an owner keeps one of four similar units for personal use and rents the other three for profit. The agency says the whole property is then specified foreign property and its entire cost amount is reported. Some Mohali families own a house with a ground floor kept for visits and upper floors let out. The example may be read as speaking to that pattern. The agency's guidance does not deal with such a house directly, and its example assumes units of roughly the same size and value.

The NRO account may sit on the same list

Rent from a Mohali tenant usually lands in an NRO account in India. Paragraph a of the definition covers funds "situated, deposited or held outside Canada". The agency's example of a deposit in a bank account abroad shows that a bank balance outside Canada is counted. On one reading of the Act, money held in an Indian NRO account may be funds deposited outside Canada. Its cost amount may then join the total alongside the flat. The agency's guidance does not mention NRO accounts directly.

Bare land is no different. The agency says specified foreign property "includes property that does not produce income", and gives vacant land as its example. A plot near the Aerotropolis held for the future, and never built on or let out, is on the list unless one of the exclusions applies to it.

When the cost is measured for older and newer homes

Three answers on the agency's page speak to common Mohali situations. For new arrivals, the agency says an individual does not file the form for the year in which he or she first became resident in Canada. For property already owned at that point, its cost amount is its fair market value at the time the person first became resident. A flat bought in Mohali before emigrating is therefore measured from its value on the date of arrival in Canada.

For property received as a gift or an inheritance, the agency says its cost amount is its fair market value when the gift or inheritance was received. A flat left by a parent in Mohali is measured from that date.

For a home still being built, the agency's example is a purchase contract with a down payment for a property to be completed later. It says the contract decides when the property is acquired, and "if the title of the property has not passed to the taxpayer", the property is not reported. Many Mohali buyers hold a builder's allotment for years before a sale deed. On the agency's answer, the moment that matters may be when title passes under the contract. The agency's guidance does not mention builder allotments directly, and it does not say when title passes under Indian law.

When the form is due and what it does not change

Section two hundred and thirty three point three requires the return to be filed on or before the owner's filing due date for the year. The agency's table puts that at the end of April for most individuals and at the middle of June where the individual or a spouse carried on a business. An owner who leaves Canada during the year reports only for the period of residence, by the agency's own answer.

The form comes in two parts. Part A is a simplified method for owners whose specified foreign property cost more than one hundred thousand dollars but less than two hundred and fifty thousand dollars throughout the year, and it asks only for a tick against each type of property. Part B is the detailed method once the total reaches two hundred and fifty thousand dollars at any time.

The agency warns of significant penalties for filing late or for a false statement or omission on the form. It also says the period in which it can reassess a return is extended by three years where foreign income was left off the return and the form was not filed on time or was inaccurate. Its Voluntary Disclosures Program may be open to filers who left information out.

What the texts leave to a professional

The Act and the agency's pages settle the main reading. A Mohali home rented out with a reasonable expectation of profit is specified foreign property. On the Act's wording, money held in the NRO account may count as well. A home used primarily by the owner or a related person for personal use is left out. The form is triggered when the total cost amount passes one hundred thousand dollars at any time in the year.

They do not settle the cost amount of a particular Mohali flat in Canadian dollars, or how a mixed pattern of family visits and short lets falls on the personal-use line. They also leave aside the tax on the rent itself in India and in Canada. Each of those turns on the owner's own facts. An owner resident in Canada needs a Canadian tax professional to look at the particular case.

Related reading

- Renting out a Mohali home from abroad: the tax the tenant deducts
- Rent from a Mohali home owned from abroad: when it can go into an NRE account
- Inheriting a Mohali property while living abroad: what India's foreign exchange rules allow
- What do India's property rules say once an NRI takes Canadian or American citizenship

Sources: The sources we use are listed on our Editorial Sources page.

This piece describes the published text of Canada's Income Tax Act and the Canada Revenue Agency's guidance on the Foreign Income Verification Statement. Nothing here is legal or tax advice, and whether a particular Mohali home or account is reported turns on its owner's own facts.