Income Taxes in Canada - Personal Income Taxes

Personal Income Taxes

Canada levies personal income tax on the worldwide income of individuals resident in Canada and on certain types of Canadian-source income earned by non-resident individuals.
Quoted from the Income Tax Act R.S.C. 1985: "An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year".

After the calendar year, Canadian residents file a T1 Tax and Benefit Return for individuals. It is due April 30, or June 15 for self-employed individuals and their spouses, or common-law partners. It is important to note, however, that any balance owing is due on or before April 30. Outstanding balances remitted after April 30 may be subject to interest charges, regardless of whether the taxpayer's filing due date is April 30 or June 15.

The amount of income tax that an individual must pay is based on the amount of their taxable income (income earned less allowed expenses) for the tax year. Personal income tax may be collected through various means:

1. deduction at source - where income tax is deducted directly from an individual's pay and sent to the CRA.
2. installment payments - where an individual must pay his or her estimated taxes during the year instead of waiting to settle up at the end of the year.
3. payment on filing - payments made with the income tax return
4. arrears payments - payments made after the return is filed

Employers may also deduct Canada Pension Plan/Quebec Pension Plan (CPP/QPP) contributions, Employment Insurance (EI) and Provincial Parental Insurance (PPIP) premiums from their employees' gross pay. Employers then send these deductions to the taxing authority.

Individuals who have overpaid taxes or had excess tax deducted at source will receive a refund from the CRA upon filing their annual tax return.

Generally, personal income tax returns for a particular year must be filed with CRA on or before April 30 of the following year.