Question

The Government of Canada recently introduced a product called a TFSA. Explain what it is and how it works. Do you have one of these accounts or will you open one in the future? Why or Why not?

Answer 1

TFSA means 'Tax-Free Savings Account' . It is a saving account that is recently introduced in the Canada to give the tax benefits to the savings. In TFSA, taxes are not applied to the investment income which includes, capital gain and dividents even when we are withdrawing it. When we set money in a TFSA, we can see that this savings will growing without tax throughout lifetime. For entire life, the capital gain, dividents, interests that we are earning in TFSA will remain tax-free.

It is good to open an TFSA account . The person who trying to open an TFSA account must be an Canadian resident. An individual who is in age 18 or more can open an TFSA account and use it for any purpose. When we considering a regular saving account, we have to pay tax over the interest you earn. But TFSA is tax-free. It is possible to withdraw the saving at anytime with any reason from TFSA without any tax.