Tax Free Saving Accounts
Tax Free Savings Account a very good initiative from Government of Canada was introduced in 2009 with a sole aim to inculcate the habit of saving more for the future. Since recession, it proved to be a good saving tool with no tax on the return earned. Since its beginning in 2009 every Canadian who has attained the age of 18 can contribute after tax $ 5,000 dollar (Which will be increased to $ 55,00 effective JAN/01/2012) into this account. Tax free savings account was started to motivate people to save more for the hard times and provide them some extra incentive for their short term savings goal and retirement planning objective.
Tax free savings account has numerous benefits and it applies to every individual regardless his or her income. Investors can hold any portfolio in their tax free savings account means they can trade in commodities, ETF’s, Mutual Funds, Stocks etc. The most important thing that investors don’t know is that they can withdraw the money held in savings account any time during the year (Except the surrender charges if applicable to the contract) and if they want to re-contribute they are allowed to put all the withdrawals back into the account not in the same year but the following year.
Overall, the benefits of these tax free savings accounts are briefed as follows:
• The earnings which you will make through investments in these accounts will not be taxed.
• You can always make withdrawals from the account; and you are allowed to re-contribute all the money including the return earned as well as principal back into the account.
• The investments and income earned will not have any effect on your Government benefits like OAS entitlement, pension credits and also HST credits..
• The account holder can invest the TFSA money in any investment vehicle of their choice.
So investing in tax free savings account is not only beneficial for you in the present, but for your future also. You can reduce the amount of tax that you are required to pay and you can also save from your future.