Tax-free Savings Account – TFSA

What is the tax free saving account (TFSA)?

In 2008 federal budget introduced the Tax free saving account (TFSA) and it came into effect on 1.Jan.2009.TFSA is an account that has tax advantage for saving purpose of Canadian. Contributions to a TFSA accounts are not deductible for income tax purposes. Investment income, including capital gainsand dividends, earned in a TFSA is not taxable, even when withdraw.

Who is eligible for Tax free saving account in Toronto, Ontario?

Any individual who is resident in Canada and is 18 years of age or older will be eligible to establish a Tax free saving account.

How much investment can deposit on TFSA?

An individual will be permitted to hold more than one tax free saving account (TFSA). Contribution room is $5,000 per person, each year. Time and number of deposit and withdrawn are regulated by Canada revenue agency (CRA).

What is the regulation of TFSA?

One mechanism in the design of the TFSA is the carry-over aspect. Any unused space under the $5,000 investment can be carried forward to subsequent years, without any upward limit. There will be no limit on the number of years that unused contribution room can be carried forward. The TFSA also allows income splitting to an extent, because a higher-earning spouse can contribute to the TFSA of a lower-earning spouse. Excess contribution will be subject to a tax of 1% per month as penalty.

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