Registered Retirement Savings Plan – RRSP
In his 1999 budget, the Prime Minister introduced tax incentives for individuals to save for their retirement. The incentive allows for an individual to set up a Registered Retirement Savings Plan (RRSP) with a financial institution.
The funds placed in such a plan can be claimed as a deduction against an individuals income for tax purposes up to a maximum of 15 % of assessable income or $ 4,000 which ever is lesser.
The income earned on the investments while held in a RRSP will not attract any further tax. Upon reaching retirement, the individual may begin withdrawals from the plan, which will be taxed in the same way as retirement income. If withdrawals are made from the plan before retirement, there will be a withholding tax of 25 %, which will be deducted at source.
It should be further noted that this plan does provide you with the opportunity to make a withdrawal. A person who contributes to a RRSP may make ONE Tax- Free Withdrawal of contributions from the plan for the purpose:
- Of acquiring the first dwelling house for use by that person as a residence, the maximum amount that a person is eligible for withdrawal is the lesser of 10% of the purchase price of the house to be acquired, or $25,000 (B’dos Income Tax Act Cap 73 Section 24H Sub. [b])