To have a registered savings plan, you must have signed an account agreement to that effect with your financial institution, the terms of which are then registered with the Canada Revenue Agency.<\/p>\n
Financial institutions must report all transactions (deposits and withdrawals) made by each person annually in these plans, the best-known being RRSPs and RRIFs. All amounts deposited and withdrawn are subject to specific restrictions. In exchange, income tax on income earned is deferred until the time of withdrawal. The only exception to this is the TFSA, where no income tax is due on income (interest, dividends, capital gains) earned, as long as the rules governing deposits and withdrawals are followed.<\/p>\n
Non-registered plans are simply savings accounts. Financial institutions are only obligated to report the income (interest earned) on the account annually. You are free to deposit and withdraw funds at any time.<\/p>\n
Income from investments held in non-registered accounts is taxed at different rates based on whether it comes from interest, dividends or capital gains.<\/p>\n
Type of income<\/strong><\/td>\n| \n | Amount <\/strong> Income tax<\/strong> Dividend <\/strong> Net amount<\/strong> $5 000<\/p>\n<\/td>\n $1 100<\/p>\n<\/td>\n \u2013<\/p>\n<\/td>\n $3 900<\/p>\n<\/td>\n<\/tr>\n $5 000<\/p>\n<\/td>\n $1 595<\/p>\n<\/td>\n $1 375<\/p>\n<\/td>\n $4 700<\/p>\n<\/td>\n<\/tr>\n $5 000<\/p>\n<\/td>\n $500<\/p>\n<\/td>\n \u2013<\/p>\n<\/td>\n $4 450<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n To answer this question, you have to know how investment income is taxed.<\/p>\n Fixed-income securities (such as term savings and bonds) bear regular interest income, while stock issues generate capital gains and in some cases, dividends.<\/p>\n Since interest income is more heavily taxed, it is better to keep interest-generating investments in a registered plan. If you put them in your TFSA or RRSP, your returns will be higher, since interest grows tax-free.<\/p>\n But, since capital gains and dividends are taxed at a lower rate, you can hold investments outside a registered plan. Income taxes will not greatly diminish your income from these investments.<\/p>\n * Financial information provided is based on government tax requirements for the year 2009.<\/p>\n |