The Canadian company is profitable, CAD is sitting in the bank and now the real question arrives: “Ye paisa India kaise laaun, aur tax kitna lagega?” Most guides on paying yourself from a Canadian corporation are written for owners who live in Canada. If you live in India, almost every answer changes: different withholding tax, different treaty treatment, and an extra layer of FEMA rules.
This guide is only about that situation a Canadian corporation owned by someone resident in India. It compares the main ways to repatriate profits from a Canadian company to India, what each costs in Canada and India, and the mistakes that trigger penalties on both sides.
In this guide
- 1. How Does a Non-Resident Shareholder Get Paid From a Canadian Company?
- 2. Dividends: Simple, but 25% Withholding for Individuals
- 3. Salary or Fees for Work You Do From India
- 4. Shareholder Loans: Getting Back Money You Lent
- 5. Return of Paid-Up Capital
- 6. Leaving Money in Canada
- 7. How India Taxes What You Bring Home
- 8. Individual vs. Indian Company as Shareholder
- 9. A Worked Example
- 10. FAQs
How Does a Non-Resident Shareholder Get Paid From a Canadian Company?
There are five practical routes. Each has a different tax result, and most founders end up using a mix:
| Route | Canadian tax on the payment | India side | Best for |
| Dividend | 25% Part XIII withholding for individuals (15% if paid to an Indian company with 10%+ votes) | Taxed at your slab; credit for Canadian tax | Distributing profits already taxed in Canada |
| Salary / fees for work done in India | Generally no Canadian tax if services are performed outside Canada; deductible to company if reasonable | Taxed in India as salary or business income | Paying you for real work, at market rates |
| Repayment of shareholder loan | No withholding on principal | No tax (return of your own money) | Getting back money you lent the company |
| Interest on shareholder loan | Withholding applies (treaty may reduce) | Taxed as interest; credit for Canadian tax | Rarely worth it for small amounts |
| Return of paid-up capital | Generally no withholding up to paid-up capital | Generally not income; reduces your cost; FEMA reporting | Getting back invested capital |
The right mix depends on how much profit you have, whether the work is actually done by you in India, and whether you funded the company with share capital or a loan.
Dividends: Simple, but 25% Withholding for Individuals
When your Canadian company pays you a dividend, it must withhold non-resident tax under Part XIII and send it to the CRA. The domestic rate is 25%. Many founders assume the India-Canada DTAA brings this down to 15% it does not, for individuals. Under Article 10 of the treaty, the 15% rate applies only where the shareholder is a company that controls at least 10% of the voting power. For an individual resident in India, the treaty ceiling stays at 25%.
Remember that the dividend is paid out of profits that have already been taxed in Canada at the corporate level. For a company controlled from India, that is usually the general combined rate of around 23–27% depending on the province, because such companies typically do not qualify as CCPCs. Add 25% withholding, and the combined Canadian tax on distributed profit becomes significant before India taxes anything.
What the company must file
- Withhold 25% (or the correct treaty rate) and remit it to the CRA by the 15th of the following month.
- Issue an NR4 slip and file the NR4 return by 31 March of the following year.
- Keep a completed NR301 declaration from the shareholder where a reduced treaty rate is claimed.
Missing these exposes the company not just you to unpaid tax, penalties and interest.
Salary or Fees for Work You Do From India
If you genuinely work for the Canadian company from India, managing clients, building the product, running operations, the company can pay you for that work. Employment income for services performed outside Canada by a non-resident is generally not taxable in Canada, and the company can deduct a reasonable amount as an expense, which lowers its Canadian corporate tax.
This is often the most tax-efficient route, but it is also the one most often abused. Three conditions keep it safe:
- It must be real work, documented with an employment or service agreement.
- The amount must be reasonable — comparable to what you would pay an unrelated person for the same role.
- India taxes it. The income is taxable in India at your slab rate, and if you invoice as a business, GST on export of services may apply.
If you are paid as an Indian company or firm providing services to your Canadian company, the arrangement becomes a related-party cross-border transaction. Transfer pricing documentation then matters in both countries, and payments for certain services to a related non-resident may attract Canadian withholding unless an exemption or treaty relief applies. Get this structured before the first invoice.
Shareholder Loans: Getting Back Money You Lent
Many founders fund their Canadian company partly as a loan rather than share capital. When the company has cash, it can repay that loan without any Canadian withholding tax on the principal it is simply your own money coming back. In India, a loan repayment is not income.
If the company pays interest on that loan, the interest paid to a related non-resident is subject to Canadian withholding, which the treaty may reduce, and it is taxable in India. For small loans, charging interest rarely makes sense.
The trap: the company lending to you
Taking money from the company as a “loan” is very different. Under Canada’s shareholder loan rules, if the company lends to a non-resident shareholder and it is not repaid within one year after the end of the company’s tax year, the amount can be treated as a dividend, with 25% withholding due. Do not use the company account as a personal account — it creates a tax bill and a FEMA problem at once.
| Talk to DKP Global — India + Canada, One Team Offices in Gurugram and Surrey, BC. Canadian incorporation, CRA registrations, bookkeeping, and India-side ODI/FEMA compliance handled together. India: +91-9990424342 Canada: +1-672-833-4342 Email: info@dkpglobal.org → Canada company registration services |
Return of Paid-Up Capital
The share capital you originally put in its paid-up capital (PUC) can generally be returned to you without Canadian withholding tax, as long as the return does not exceed the PUC of the shares. This is useful if you over-capitalised the company at the start, or if you are winding down.
On the India side, a return of capital is a disinvestment or reduction of your ODI and must be reported through your Authorised Dealer bank. Corporate law steps in with a proper resolution and solvency test in Canada too. It is not a substitute for paying out profits, because PUC is limited to what you invested.
Leaving Money in Canada
You do not have to bring profits home immediately. Profits retained in the Canadian company are taxed only at the corporate level until distributed, and can fund growth, hiring, marketing, and expansion into the US. Many of our clients pay themselves a reasonable salary for their work and leave the remaining profit in Canada until a larger dividend makes sense.
Two cautions. First, FEMA’s ODI rules expect dues receivable from your foreign investment, such as declared dividends to be brought to India within 90 days of falling due, so once a dividend is declared, it should come home. Second, retained profit sits in a company controlled from India; if you later move to Canada or sell the company, the tax position changes. Plan exits, not just payouts.
How India Taxes What You Bring Home
- Dividends from the Canadian company are taxed in India at your slab rate as income from other sources.
- Salary or fees for work done in India are taxed in India as salary or business income.
- Foreign tax credit: you can claim credit for Canadian tax withheld, up to the Indian tax on that income, by filing Form 67 before your income tax return.
- Schedule FA: your shares in the Canadian company must be disclosed every year.
- TCS/ODI: money flowing back is not subject to TCS, but ODI reporting (APR, disinvestment) still applies.
Because Canadian tax on dividends to individuals is high, the foreign tax credit may not fully cover it if your Indian tax on that income is lower, leaving some Canadian tax as a real cost. That is exactly why the mix of routes matters.
Individual vs Indian Company as Shareholder
Here is the structural point most founders discover too late: if your Indian company owns at least 10% of the voting power in the Canadian company, the treaty cap on dividend withholding falls to 15% instead of 25%. Indian companies also have different tax treatment on foreign dividends received from subsidiaries in some cases. Holding the Canadian company through an Indian company is not always better — it adds corporate compliance and a second layer of tax when profits reach you personally — but for profitable businesses that plan to distribute regularly, it is worth modelling before incorporating. Changing the shareholder later means a share transfer, possible Canadian tax on the transfer, and fresh ODI filings.
A Worked Example
Say your Ontario company earns CAD 100,000 profit, you live in India, and you do all the client work from India. Option A: pay no salary, and distribute everything as a dividend. The company pays corporate tax first, then withholds 25% on the dividend, and India taxes the dividend again with partial credit. Option B: pay yourself a reasonable fee for the work you actually do, say CAD 60,000, deductible in Canada; the company pays corporate tax only on the remaining CAD 40,000, and India taxes your fee as normal income. In most cases, Option B leaves considerably more in your hands, provided the fee is genuinely justified and documented. The exact numbers depend on your Indian slab, province and structure, so treat this as a direction, not a calculation.
Also Read- Canada company registration services
Also Read- salary vs dividend for resident owners
Also Read- India-Canada DTAA
Also Read- ODI rules
Also Read- CCPC status for foreign-owned companies
Also Read- T2 corporate tax return
Also Read- Canada vs USA
Also Read- CRA — Part XIII tax and NR4
Frequently Asked Questions
Through dividends, salary or fees for real work you do, repayment of shareholder loans, or return of paid-up capital. Each has different Canadian and Indian tax results.
25% for individuals resident in India. The India-Canada DTAA reduces it to 15% only where the shareholder is a company with at least 10% of the voting power.
Yes, for real work, at a reasonable amount. Employment income for services performed outside Canada is generally not taxed in Canada but is taxed in India.
Avoid it. A loan to a non-resident shareholder not repaid within one year after the company’s year-end can be treated as a dividend with 25% withholding.
No Canadian withholding applies to repayment of principal, and it is not income in India.
Canada withholds tax, and India taxes the dividend, but you can claim a foreign tax credit in India by filing Form 67, up to the Indian tax on that income.
Final Word
For a founder living in India, the cheapest way out of a Canadian company is rarely a straight dividend. A reasonable, documented fee for real work, repayment of shareholder loans, and return of capital often beat it while dividends to individuals carry 25% Canadian withholding that the treaty does not reduce.
DKP Global plans this on both sides: Amanpreet’s team handles the Canadian withholding, NR4 and T2, and our Gurugram team handles your Indian tax, Form 67 and ODI reporting. Start with our Canada company registration services or ask us to review your current payout plan.