Where Should You Invest Your Savings?

As we all know, there are many options for us to invest our savings. You have options to invest in RRSP (Registered Retirement Savings Plan), TFSA (Tax-Free Savings Account), RESP (Registered Education Plan), paying down our mortgage etc.

Investment in RRSP Vs. Tax Free Savings Account:

Investment in RRSPs is subject to limits mentioned by Canada Revenue Agency in the Notice of Assessment. The way an RRSP works is, you get tax benefits in the year in which you invest in RRSP and you pay tax in the year of withdrawal. You derive benefits on an overall basis if the tax benefit exceeds the potential tax liability in future.

If you are looking to buy your first home (you have to qualify as a first time home buyer) in Canada, it could be tax advantageous for you to invest in RRSP because your withdrawal under “First Time Home Buyers’ Plan” is not taxable.

However, if you anticipate your future earnings in a higher tax bracket, RRSP investments may not be tax advantageous and you may want to consider investments in a TFSA. TFSA investments do not qualify for any tax benefit when invested and is not taxable when withdrawn (i.e. no gain, no loss). Keep in mind that investments within TFSAs must be within the prescribed limits (by CRA).

RESP VS. TFSA:

Investment in RESPs provide you an annual guaranteed return in the form of Federal Government Grant of 20% on you contribution (20% on $2,500). This investment is for your children’s post-secondary education and it should be supplemented with your other savings. The RESP savings are tax deferred in the sense that the growth inside the plan grows tax free and is taxable in the hands of the child when it is withdrawn.

Paying Down Mortgage vs. TFSA:

If you are considering to invest in a TFSA vs. paying down your mortgage, it probably makes sense in most cases to reduce your non-deductible interest as soon as possible.

In case of any specific question, please feel free to write at piyushmody64@gmail.com.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable under individual cases. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Tax dates to keep in mind in June 2016

Please note following dates in June 2016.

June 15:

Individual Business Tax Return:

The last date to file the income tax return for individuals having business income is June 15. However, the tax due if any, should have been paid in full by May 02,2016 (since April 30, was a weekend and the next working day was May 02,2016).

If the tax return is not filed by June 15, there will be penalty consequences of 5% Flat penalty on the amount of tax owing plus 1% per month recurring penalty.

If tax in full was not paid by April 30, 2016, interest on the amount of owing will be charged by Canada Revenue Agency (CRA) as per quarterly interest rates declared by them ahead of the quarter. Currently, for the second quarter it is @5% per annum.

Advance Installment of Tax:

June 15 is the last date for payment of advance Income tax installment for individual taxpayers in case if you estimate that your tax liability for the year 2016 is likely to exceed $3,000. This is the second payment date after March 15 being the first installment date for the year 2016. The next installment dates for the year 2016 will be September 15 and December 15, 25% of the total tax due at the end of the year is due on each installment.

Interest for deferment of tax will be payable at the relevant rates declared by CRA for each quarter.

Payroll Tax Payment:

June 15 will also be the deadline for payment of payroll tax in case you own your own corporation and have taken out salary in the month of May from your corporation. Delay in payment of payroll tax by more than 10 days will attract 10% of the payroll tax as penalty.

Corporate owners who have deducted in their taxes management salary as a matter of tax planning have to remember to take out their salary within 180 days of the close of the corporate tax year. By that standard if your corporation has a December 31^st year end, you should remember to take out each month a salary and pay payroll tax to avoid the disallowance.

Non-Resident Tax Return(June 30):

In case if you are a non-resident, deriving income from property and having income by way of interest, rent, royalty, dividend etc. you have to pay 25% tax on the amount of such income each month. 25% tax needs to be remitted on the gross amount of income by way of rent, interest, dividend etc. each month. However, it can be remitted on the net amount of income (after deducting the expenses) each month provided CRA’s permission is sought in advance. CRA grants such permission and prescribes the condition of filing the tax return by June 30.   

For such non-resident tax returns, the deadline for filing is June 30.

Should you have any questions or want to more, feel free to call 647-988-9591 or write to us at piyushmody64@gmail.com

Disclaimer: Any discussion on this blog relating to the tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there could be a different tax strategy in a particular case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situation or a problem, you are advised to seek the professional advice.