Question reg withdrawal / payout from RRSP


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ashedfc   
Member since: Jun 10
Posts: 2153
Location: GTA

Post ID: #PID Posted on: 10-08-10 18:00:16

Quote:
Originally posted by Your friend

Kumar M

It depends. The withholding taxes on your RRSP withdrawal can be more than 10%. If you keep on making regular withdrawals and total of all those withdrawal for a specific fiscal year exceeds $5000.00 then withholding tax of 20% would apply as per CRA rules. This is applicable for all Canadian provinces except Quebec.

$ 0-5000------------10%
$ 5001-15000------20%
$15001 and more---30%



Exactly true - Because all the withdrawals are added to the income for tax purpose (so CRA, has a rule to collect its income tax, as withholding, so as the amount increases the tax liability also increases). You have to pay the tax bill.

Regarding on the spot withholding tax, say for for example $20000 can be withdrawn in 4 instalments of $5000 & only 10% withholding tax will apply.



ashedfc   
Member since: Jun 10
Posts: 2153
Location: GTA

Post ID: #PID Posted on: 10-08-10 18:07:24

Quote:
Originally posted by KumarM

Thanks again.

Interesting. I am also planning ot move all the RRSPs either SBI or ICICI (in Canada). Both offer RRSPs per their websites. RRSP --> RRIF-->monthly income-->$ to Rs. I hope I am doing this right.



If you are moving your money from Canadian $ to Indian Rs. you are actually making a currency decision for the future. Its hard to predict the strength of Indian Rupees vs Canadian Dollar.
Indian Rupees has a lot of problems on the currency, its the govt. necessicity to devalue the currency, thereby reducing purchasing power.
If you go by the past, any investment staying in CDN $ makes sense. There are several clients who have invested large chunk of money in Indian Rupees at say 8% interest or more, but the currency loss with end up generating negative return, because in 2003 CDN was 32 Rupees, & in 2010 its 45Rs.
It means, investments in Indian Rs making over 30% in this time frame & investments in Canadian $ making zero % is exactly the same.



KumarM   
Member since: Jan 09
Posts: 881
Location:

Post ID: #PID Posted on: 10-08-10 20:17:28

May be I spoke quickly. If I convert to RRIF, would the 10% (<$k) or 20% ($5-$10k) tax still applicable?



ashedfc   
Member since: Jun 10
Posts: 2153
Location: GTA

Post ID: #PID Posted on: 10-08-10 21:40:34

RRSP or RRIF it doesn't matter, tax law is the same for all Registered accounts.
RRSP is Registered Retirement Savings Plan &
RRIF is Registered Retirement Income Fund.
For CRA registration purpose both are same, difference for RRIF account, is that you cannot contribute into a RRIF, & RRIF has a mandatory minimum withdrawal requirement, its a must (means even if you do not withdraw the money, the institution will automatically do it for you, & give you a T slip for tax purpose.

RRIF is not advisable unless you are 71yrs of age, because at age 71 all RRSP automatically gets converted to RRIF.

Keep the account in RRSP, & do whatever you want to do with it.



Your friend   
Member since: Apr 06
Posts: 325
Location: Canada

Post ID: #PID Posted on: 11-08-10 11:18:30

I want to add something regarding reply from ashedfc:

"If you are moving your money from Canadian $ to Indian Rs. you are actually making a currency decision for the future. Its hard to predict the strength of Indian Rupees vs Canadian Dollar.
Indian Rupees has a lot of problems on the currency, its the govt. necessicity to devalue the currency, thereby reducing purchasing power.
If you go by the past, any investment staying in CDN $ makes sense. There are several clients who have invested large chunk of money in Indian Rupees at say 8% interest or more, but the currency loss with end up generating negative return, because in 2003 CDN was 32 Rupees, & in 2010 its 45Rs.
It means, investments in Indian Rs making over 30% in this time frame & investments in Canadian $ making zero % is exactly the same."


In order to check tax evasion CRA wants banking institutions to take cumulative total of all the withdrawals from RRSP for a specific year let's say 2010 and apply withholding tax on the whole amount depending upon which tax bracket it falls under. Whether banking institutions follow CRA guidelines or not is a different story.

For RRIF minimum payment amount is never subjected to withholding taxes.


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ashedfc   
Member since: Jun 10
Posts: 2153
Location: GTA

Post ID: #PID Posted on: 11-08-10 13:08:05

Quote:
Originally posted by Your friend

I want to add something regarding reply from ashedfc:

"If you are moving your money from Canadian $ to Indian Rs. you are actually making a currency decision for the future. Its hard to predict the strength of Indian Rupees vs Canadian Dollar.
Indian Rupees has a lot of problems on the currency, its the govt. necessicity to devalue the currency, thereby reducing purchasing power.
If you go by the past, any investment staying in CDN $ makes sense. There are several clients who have invested large chunk of money in Indian Rupees at say 8% interest or more, but the currency loss with end up generating negative return, because in 2003 CDN was 32 Rupees, & in 2010 its 45Rs.
It means, investments in Indian Rs making over 30% in this time frame & investments in Canadian $ making zero % is exactly the same."


In order to check tax evasion CRA wants banking institutions to take cumulative total of all the withdrawals from RRSP for a specific year let's say 2010 and apply withholding tax on the whole amount depending upon which tax bracket it falls under. Whether banking institutions follow CRA guidelines or not is a different story.

For RRIF minimum payment amount is never subjected to withholding taxes.



YES True - RRIF minimum has no witholding tax (only when you exceed the RRIF minimum than the witholding tax applies in the same formula as RRSP). However, the RRIF mimimum amount is to be added to total income for tax purpose, & there is tax liability which is to paid (so CRA is collecting tax indirectly).
Regarding SBI or ICICI, as long as the account stays as Registered under CRA, it does not matter what rule they follow or what currency they keep the money, CRA-s rules are always applicable.
As a suggestion, Look at Gold investments in RRSP, Gold has regained its value as currency, & we are expecting severe economic contraction in the near future, & in that case all other currencies will be severely impacted. US dollor which benefits traditionally in any recession will have its own problems due to the massive US debt, so, Gold is the only true safe heaven.
Its not about Growth - rather, Its about protecting the value of what you have.



Contributors: ashedfc(6) KumarM(4) Your friend(2) Pramod Chopra(1)



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