I am an Indian citizen living in Canada on work permit which expired on 31st May.

I have already applied for Work Permit extension but it is still in process and have not received yet.

I need to travel to India via Frankfurt/Munich.

Will there be any problem? Would a Transit Visa help?

Although my wife and I have valid US B1 visas, my daughter (4 yr old) does not have one.

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    does "via Frankfurt/Munich" mean that you will be flying from Frankfurt to Munich, or does it mean that you will be flying via one city or the other? – phoog Jul 22 '15 at 8:42
  • @phoog I think he meant via either Frankfurt or Munich (as a lay over), I just edited the question to clarify it but I left this untouched as I am not 100% sure what he meant. – Adrien Be Jul 24 '15 at 18:36
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    @AdrienBe I have a flight next month from Sarajevo to Lisbon via both Frankfurt and Munich. In addition, there are a few questions on the site from Indian travelers with itineraries that have them land in one airport and then fly to the other. So we really can't be sure of the answer unless we know what "via Frankfurt/Munich" means. – phoog Jul 25 '15 at 18:13

Whether or not you need a visa to transit Europe on your way to India is separate from your status in Canada as citizenship (rather than residence status) is usually more relevant.

There's loads of questions here that deal with that, here are a couple:
- Transit visa required ?
- Schengen transit visa ?

From one of the above answers it seems you won't need a visa to transit Germany because you hold a US B1 visa, but as @pnuts suggested that means your daughter might need one.

Canada doesn't do exit checks so you probably won't have any issues leaving, but you will when you come back if your permit isn't up to date

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No you will not be allowed to board your flight to Germany. You need to have a valid visa in the country you are boarding from. In case you are not allowed entry into the Schengen, you will be deported to the place your flight originated from. Hence even if you have a valid docs for Germany and India, you will not be allowed to travel to Germany.

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    I can't imagine why you'd ever be prevented from leaving. Even if you no longer have valid legal status, surely that would only make them happier to be rid of you in the country of departure. – CMaster Feb 1 '16 at 14:40
  • Its not the US that prevents you from leaving. Its Schengen that prevents you from landing, in case they can't kick you out if they need to. – Somaiah Kumbera Feb 1 '16 at 14:41

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