Q.848 Effect of Indian pension on

Guaranteed Income Supplement

Question: Resp.Sir, I was reading answer to question No.792 where you have mentioned that where ever DTAA is applicable , foreign pension should be mentioned in line No.256 to avoid tax in Canada. That's O.K. But my question is, Will the amount mentioned in line No.256 have any effect on Guranteed Income Supplement ( GIS ) being received by the pensioner in Canada and if yes how much ? Thanks. [February 10, 2016] Answer: The Canadian Guaranteed Income Supplement (GIS) is not a universal benefit that applies to all Canadians on reaching the retirement age. GIS benefit is an income tested benefit based on an individuals income from the previous year or in case of a couple, their combined income for the previous year. All pension income, whether taxable in Canada or not will be considered as income for calculating benefits under the Canadian Guaranteed Income Supplement plan. So the pension received in India is considered part of your income. Even if you decide not to bring your Indian pension to Canada, the amount is still considered as income. What is considered as income for GIS calculation • All Government Pensions [Except Old Age Security (OAS) Payments] • All other pensions such as private pensions form your employer. • All foreign pensions. [Foreign pensions may be exempt from taxes under DTAA but are income for GIS calculation] • Any cash withdrawals from a persons Registered Retirement Savings Plans (RRSP) • All interest and investment income [ See not on TFSA* below] • Income if any from rental properties • Capital gains and dividends etc.

Canadians planning to retire abroad

Canadians of Indian origin who decide to retire in India should be aware that while they may receive some Canadian government pension benefits in India, they would not be able to avail the benefit of Canadian Guaranteed Income Supplement (GIS) as this benefit is only for those who have a low income and are living in Canada. Under question number 844 of this website, I have posted some information under the heading: ‘Canadians planning to retire in India and their government pensions.’ To read the article check FAQ #844.

Plan to Maximize your GIS benefits

With a little bit of financial planning by those who are getting close to their retirement age, they can get the most out of the Canadian Guaranteed Income Supplement benefit. As RRSP withdrawals count as income for GIS calculation purposes, those who are nearing retirement and have small amounts of money in their RRSP should consider the option of withdrawing the money out before reaching the age when they become eligible for GIS payments. Since all interest payments received are taxable income and included in calculating GIS benefit, consider keeping some of your money in non taxable accounts such as Tax- Free Savings Account (TFSA). Interest income received in these accounts is tax free and you can withdraw your money without any restrictions.