Posted on: 27-04-10 11:02:29
Hi friends,
I am rather confused on withdrawing amount from RRSP account in the year when ones actual income is less, does that involve any penalties from the bank where we hold the accountÉ
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mor
Whenever you experience joy, peace, security, equanimity or purity, it is only because you are aligned with ALMIGHTY.
Quote:
Originally posted by peacock1
Hi friends,
I am rather confused on withdrawing amount from RRSP account in the year when ones actual income is less, does that involve any penalties from the bank where we hold the accountÉ
When you withdraw your RRSP, the bank deducts 10% as tax. When filing your returns the amount withdrawn gets added to your income, and your tax bracket will be determined based on your total income.
In terms of penalty, it depends on the type of investment, and penalty may depend on your bank.
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SS
Reiki Grand Master
SS ji, I belive the withholding taxes is not just 10%, it depends how much money u withdraw.
Just elobrating on what SSji wrote...
Although an RSP is more effective as a long-term investment, you may withdraw all or part of it at any time. RSP withdrawals are subject to tax and the terms of the investment you choose. But the important part is that your money is available if you need it.
Withholding taxes apply on funds withdrawn from an RSP except when funds are transferred from one RSP to another, or when funds are transferred to a retirement income option such as a Retirement Income Fund (RIF).
Withholding Taxes
Funds withdrawn from an RRSP will be charged withholding taxes. This amount must be held back by the plan administrator and remitted to the government on your behalf.
Effective January 1, 2005, the following withholding tax rates apply:
Amount of RRSPWithdrawal-----All Provinces Except Quebec----- Quebec
Up to and including $5,000----- 10%------------------------------- 21%
$5,000.01 to $15,000---------- 20%------------------------------- 26%
More than $15,000------------- 30%------------------------------- 31%
You will receive a T4 RSP receipt for any funds withdrawn during the year showing the amount to be included in your taxable income and the credit for the withholding tax.
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Amit Shah
Financial Advisor
Cell : 647-296-2609
I recall that there is a form you can submit to the financial institution prior to withdrawal to avoid the witholding taxes.
One of the financial planners or tax experts here may know the exact number, or Google it.
If you are certain your income during the year of withdrawal will not warrant income taxes at that level, submit the form to avoid the witholding.
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