If you live in Canada, you have to pay a lot of taxes. Every resident of Canada is required to file a Canadian income tax return annually. Now, the thing is that there are a lot of misconceptions about taxes. Some people say that half of your earning will go into taxes. But that is not the case. Mostly, you are charged a marginal tax rate based on your income.
On the other hand, various things are not taxed in Canada. Knowing about them can help you with your taxes. It is not a very big list, but still, we should know about it.
Whenever you are doing your financial management, you need to make sure that you figure out the income taxable and how you don’t have to pay the taxes.
Income that is Not Taxable
There are a few types of incomes that are not taxable:
- GST/HST Credit: People with a low to modest income benefit from availing of GST/HST credit in which the CRA compensates for the payment of GST/HST paid by the citizens. The Canada Revenue Agency (CRA) pays GST/HST credit to the qualifying individuals and families. You can easily apply for the GST/HST credit by filing your tax return.
If you are a new resident of Canada, then the procedure is a little different. You have to fill one of the forms to apply for the credit. It would be a different form for the people who have children and another form for those without children.
- Canada Child Benefits (CCB) Payment: When you have children under 18, you can get the CCB payments, a tax-free payment, and help support the low to middle-class income family.
- Gifts and Inheritances: Unlike many other countries, Canada does not have any gift tax. Even if you have received the gift from your relative, you are not eligible to pay the tax. Secondly, there is no tax on inheritance money as well. Apart from that, the amount received as a beneficiary of the life insurance policy is not taxable either.
- Tax-Free Savings Account:The TFSA initially started in 2009, in which you are entitled to open an account with any financial institution. You can make a different kind of payment with a TFSA account. For example, you are investing in the purchase of shares, bonds, mutual funds, etc. All the income you generate from TFSA investments is not taxable, and the withdrawals are made from this account
Almost all the income in Canada is taxed, but there are a few exceptions discussed above. People are not very well aware of these incomes. You can take benefit from the income which is not taxable.
As Canadian citizens, we all should know how tax works and what income is not taxable. This way, you can find out about ways you can save your tax money.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.