Canadians can now have a tax relief on a saving product. Residents 18 or older can register for this tax-free product – Tax Free Saving Account.
January 2009, you can register for a TFSA. You may contribute up to a maximum of $5000.00 per year to your TFSA. Starting in 2013, this amount has increased to $5,500 per year and the interest inside the product grows tax-free! There are many benefits with this account, such as; ability to withdrawal money as often you wish, no penalties on the withdrawals, as long as your total contribution does not exceed the allowable contribution space in a given year.
In addition, TFSA do not tax you on the interested gained within your TFSA product. This means compound interest in a TFSA will grow much faster because it will never be eroded by taxation.
However, if you over contribute to your TFSA – you will then be subject to tax and therefore need to consult with your financial advisor for more details
Generally, the types of investments that will be permitted in a TFSA are the same as those permitted in a registered retirement savings plan (RRSP). This would include:
securities listed on a designated stock exchange;
guaranteed investment certificates (GICs);
certain shares of small business corporations
For more information, visit http://www.tfsa.gc.ca/ to learn how TFSA could work for you!