As the tax season rolls around each year, Canadians find themselves immersed in the complexities of the Canadian taxation system. Properly reporting income is crucial to avoid penalties and the accumulation of outstanding balances with the Canada Revenue Agency (CRA). While taxable income forms the bulk of one's earnings, there are certain sources of income that the CRA and Income Tax Act have deemed non-taxable income in Canada. In this article, we will explore the various types of non-taxable income in Canada, shedding light on the exemptions and regulations associated with each category.

Amounts paid by the government

Image Of Government Benefits That Are Non -Taxable Income In Canada

One of the primary categories of non-taxable income in Canada is certain payments received from the provincial and federal governments. These types of government benefits do not need to be reported on a personal tax return. These payments include:

  • GST/HST credits: The GST/HST credit is a tax-free quarterly payment provided by the federal government to help low-income individuals and families offset the taxes paid on goods and services. This credit is calculated based on various factors, including family size and income level. It is important to note that this credit is considered non-taxable income in Canada and does not need to be declared as part of your income tax filings.
  • Canada Child Benefits (CCB): The Canada Child Benefit is a tax-free monthly payment provided by the federal government and provincial government to eligible families to assist with the cost of raising children. The amount received through the CCB is based on factors such as the number of children in the family, their ages, and the family's income level.
  • Child assistance payments (Quebec): In Quebec, the provincial government provides child assistance and supplement payments to eligible families for handicapped children. These payments are intended to support the financial needs of children and are considered non-taxable income in Canada. If you reside in Quebec and receive child assistance payments, you are not required to include them in your taxable income.

However, even though certain types of income are not taxed, they must be recorded on the tax return and included in the taxable income for tax purposes before being deducted later. Because of this, these amounts may affect some tax credits, income-tested benefits, and clawbacks. The types of income include the following:

  • Social assistance payments such as Guaranteed Income Supplement (GIS) and the Allowance
  • Workers compensation benefits from T5007 slip

Gifts and inheritance

Image Of Glasses Pen With Last Will And Testament As Text

In general, gifts and inheritances are considered non-taxable income in Canada. There are, however, some exceptions to this rule. One of the exceptions is when the gift is received from your employer in your capacity of being an employee. In those cases, the gifts will likely be considered a taxable benefit to the employee.

Another exception is when you receive gifts that are capital property (e.g. real estate, investments). In such cases. the person who has given the gift will be deemed to have sold the capital property at fair market value (FMV). As a result, they will have to pay tax on any resulting capital gain, despite having transferred the beneficial interest in the asset to another party.

In addition to the above, gifts received in the form of cash or other property from someone who is in debt to CRA will not be tax-exempt. In this situation, the recipient of the cash or other property can be held responsible for paying any outstanding tax liabilities of the transferor up to the FMV of the property transferred, less the FMV of anything that was given in return.

This could apply, for example, if one spouse transfers his or her stake in the family home to the other. It might also be relevant if a private company pays dividends while there is still an outstanding tax obligation. In the case of death, all tax debt owed to the government at the time of the testator's death must be paid before any property can be distributed to the beneficiaries.

Also, most amounts received by the beneficiary of a life insurance policy are also considered non-taxable income in Canada.

Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs)

The tax-free savings program began in 2009. The purpose of the program is to encourage Canadians to save money by providing them with a tax-sheltered account to invest. The TFSA is available to any Canadian resident aged 18 and over. All investment income (including capital gains and dividends) earned in a TFSA is tax-free. Withdrawals from a TFSA are also not subject to taxation while contributions are not tax deductible.

The registered retirement savings plan is a long-term saving program that offers tax benefits to encourage Canadians to save for their retirement. Investment income earned in an RRSP is not taxed until it is withdrawn. However, any contributions that you have made to these accounts may be deducted from your taxable income.

There are annual limits on the amount that you can contribute to your TFSA and RRSP. The annual RRSP and TFSA contribution limit can be found on the CRA's website.

Related: Year-End Tax Planning Tips - 2022

Other non-taxable income in Canada

There are also other types of payments that are considered non-taxable income in Canada. These include:

  • Lottery winnings unless they are regarded as annuity payments
  • Amounts paid by Canada or an allied Country for disability or death of war veteran due to war service
  • Strike pay received from your union, even if you perform picketing duties as a requirement of membership.

A list of income that is not taxed can be found in the ITA in s. 81, amounts not included in computing income. For more information, also refer to CRA’s summary on Amounts that are not taxed.


Understanding the various sources of non-taxable income in Canada is essential for accurately reporting your earnings and maximizing your tax benefits. From government payments to TFSAs, RRSPs, lottery winnings, gifts, and inheritances, these non-taxable income sources provide individuals with opportunities to grow their wealth without incurring additional tax liabilities. If you’re concerned about unreported income or want to know whether a source is taxable or considered non-taxable income in Canada, speak to a professional tax accountant or contact us, so we can help answer all your questions.

If you want to learn more about other tax and accounting topics, explore the rest of our blog!


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.

Share this article!

Written by Neena Gambhir

I'm a Chartered Professional Accountant and have been navigating the waters of public accounting for over a decade. I've had the privilege to work with all sorts of clients – from small family-owned businesses to those big names on the stock exchange, spanning various sectors. Through these experiences, I've gathered a ton of knowledge, especially when it comes to Canadian corporate and individual taxes. I've also got a solid handle on the ins and outs of partnership, trust, and estate taxes.

Leave a Reply

Your email address will not be published. Required fields are marked *


linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram