Capital Gains Compared: U.S., Canada and India

Capital gains compared across the United States, Canada and India comes down to three design choices: whether long holding earns a lower rate, how much of the gain is counted, and what is exempt. The U.S. gives long-term gains special rates of 0%, 15% or 20%. Canada counts only half of a capital gain as income. India set most long-term gains at 12.5% without inflation indexation for transfers on or after July 23, 2024. This page lays the three side by side for 2025 and 2026 and explains the currency and credit traps for people who sell property or investments in more than one country.

Capital gains compared: the basic rules

United States details

For 2025 the IRS lists the zero-rate band as taxable income up to $48,350 for single filers, $96,700 for married filing jointly and $64,750 for head of household. The 15% rate applies above those amounts up to $533,400 for single filers, $600,050 for joint filers and $566,700 for heads of household, and the 20% rate applies above that. Collectibles and certain small business stock can be taxed up to 28%, and unrecaptured gain from depreciation on real property is taxed up to 25%. The holding period starts the day after you acquire the asset and includes the day you dispose of it. The 3.8% net investment income tax applies when modified adjusted gross income is above $200,000 for single filers, $250,000 for married filing jointly or $125,000 for married filing separately.

On a home sale, the IRS excludes up to $250,000 of gain for single filers and $500,000 for joint filers if you owned the home and used it as your residence for at least 24 months of the last five years; the exclusion generally cannot be used again within two years. Illinois adds its flat income tax rate on the gain. See multistate residency and nexus if you moved.

Canada details

In Canada half of a capital gain is added to income. On March 21, 2025 the Prime Minister announced that the government would cancel the proposed increase in the inclusion rate and keep the increase in the lifetime capital gains exemption to $1,250,000 for sales of small business shares and farming and fishing property. A property qualifies as a principal residence only if conditions are met, including that you designate it. The CRA also says a gain on a housing unit owned for less than 365 consecutive days is generally treated as business income unless a listed life event applies. See Canada capital gains and principal residence.

India details

The CBDT explains that holding periods were simplified to two, one year and two years, indexation was done away with and the rate for other long-term gains was set at 12.5%, replacing 20% with indexation. For listed equity and equity funds, the short-term rate rose from 15% to 20%, the long-term rate from 10% to 12.5%, and the long-term exemption limit from Rs 1 lakh to Rs 1.25 lakh. The new provisions apply to transfers from July 23, 2024. Rollover benefits for reinvestment remain, including investment in specified bonds up to Rs 50 lakh. NRIs should also read about TDS on property sale by NRIs, where the buyer withholds tax, and India capital gains for NRIs. The Income-tax Act, 2025 came into force on April 1, 2026, and your CA confirms how these rules are written under it.

What this means across borders

• Different gains for the same asset. The U.S. measures in dollars at the dates of purchase and sale; India and Canada use their own currencies. A rupee that weakens can shrink the U.S. gain while the Indian gain remains large.
• Credits may not match. Indian tax paid on a gain generally supports a U.S. foreign tax credit, but the amount usable depends on the U.S. tax on that income.
• Mutual funds. Indian and Canadian mutual funds are often passive foreign investment companies for U.S. persons, which can produce a heavier U.S. tax result. See Canadian mutual funds and PFIC.
• Home-sale exclusions do not travel. The U.S. exclusion can apply to a foreign home that qualifies, but the Canadian designation and the Indian rollover rules work differently.
• Reporting. A sale abroad can require a U.S. return entry, a foreign return and updated foreign-asset reports.

A worked example

A U.S. resident sells a Pune flat held for ten years. The cost was Rs 60 lakh and the sale value Rs 1.2 crore, so the rupee gain is Rs 60 lakh. India taxes it as a long-term gain at 12.5%, or Rs 7.5 lakh before surcharge and cess. For the U.S., suppose the hypothetical rate at purchase was Rs 50 to the dollar and at sale Rs 90 to the dollar. Cost is then $120,000 and proceeds $133,333, so the U.S. gain is only $13,333. At a 15% rate that is about $2,000 of U.S. tax, while the Indian tax converts to about $8,333. The foreign tax credit wipes out the U.S. tax on this gain, and the excess credit generally cannot reduce U.S. tax on other income. The rates are made up for the illustration, and actual dates and rates drive the result.

Mistakes to avoid

• Assuming the Indian gain equals the U.S. gain.
• Using the wrong holding period: 12 months for listed securities in India and more than one year in the U.S.
• Forgetting the 3.8% net investment income tax on U.S. gains.
• Missing TDS and the buyer's withholding when an NRI sells Indian property.
• Selling Indian or Canadian mutual funds without checking PFIC treatment.
• Not designating a principal residence in Canada.

How we can help

Our Aurora, Illinois firm computes the U.S. gain in dollars, supports the foreign tax credit and coordinates with your Canadian CPA and Indian CA so sales are reported consistently. See real estate investor tax services, cross-border tax services and foreign tax credits across three countries. More three-country tables are on the comparisons hub.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.