Q633. Save taxes on Canada RRSP

withdrawal after moving to India

Question: Hi Vic,

Thanks for answering my questions. Tax liabilities for India is clear to me that I won't be taxes for two years because of RNOR statues. However, Taxes in Canada for withdrwal of RRSP is not clear to me. For example, now If I have $ 50,000 lying as RRSP in Canadian bank and I withdraw 25,000 each year and finish in two years to save taxes in India (because of RNOR Status) . In that case, $ 25,000 would be my taxable income in Canada each year and I would be taxes $ 2648 taxes as per chart, if there is no other income in Canada Is that the only tax, I would pay in Canada ? Will that be deducted from my withdrwal of of $ 25000 ? I read something about withholding tax of 25 %. during withdrawl of RRSP. I hope that it would be applicable in the above case Regards Kumar Answer: * Continuation of question # 631 Withholding tax that is applicable to withdrawals from RRSP accounts in Canada depends on the amount of money withdrawn. The withholding tax rate currently in Canada on RRSP withdrawals is between 10% and 30%. • Withdraw Up to $5,000 then the tax withheld is calculated @ 10% • Withdraw between $5,000 and $15,000 tax withheld is calculated @ 20% • Withdraw more than $15,000 then the tax withheld calculated @ 30% When you file your income tax, you will get the benefit of calculating your tax after using the deductions allowed to individuals as the basic personal amount tax free exemption, I believe this exemption is currently $10,822 and is adjusted yearly taking inflation into account. Sample three year withdrawals: • If for instance you withdraw $10800 first year - Your tax liabilities in Canada if no other income would be Zero! and you may get your tax withheld back. - Not taxable in India • Second year withdrawal $10800 - This amount will also be covered under your basic tax exemption so tax deducted would result in a refund when you file your taxes - Not taxable in India • Withdraw the balance of $3400 - No tax in Canada as under basic exemption amount - Taxable in India but should be covered in your basic tax exempt amount and incur no taxes