7 hours ago
3
Ottawa:
The Canadian government has announced a significant personal income tax cut to ease financial stress on low and middle-class income families. The move is one of the first legislative priorities of Prime Minister Mark Carney's new cabinet, which could provide much-needed breathing room for Canadians struggling with high inflation.
"This tax cut will help hard-working Canadians keep more of their pay cheques to spend where it matters most. This measure is expected to deliver over USD 27 billion in tax savings to Canadians over five years, starting in 2025-26," Finance Minister Francois-Philippe Champagne said in a statement.
Per the government, the lowest personal income tax rate will be reduced from 15 per cent to 14 per cent from July 1.
Listing the economic benefits of the new middle-class tax cut, the Minister noted the move would provide support amid ongoing economic challenges, including trade uncertainties.
"Every Canadian should be able to afford necessities, feel secure, and get ahead financially--and this tax cut will help them do just that. As Canadians continue to feel the impact of ongoing challenges, including trade and tariff uncertainties, they should be able to keep more of what they earn to help build a stronger future and a more resilient Canada," Champagne said
The government said that since the tax cut starts mid-year, the average rate for 2025 will be 14.5 per cent, and it could help two-income households save up to USD 840 per year by 2026. The relief targeted at people earning under USD 114,750, especially those earning below USD 57,375 in 2025 and is expected to benefit nearly 22 million Canadians.
Tables for tax deductions will be modified by the Canada Revenue Agency (CRA) so that employees can notice lower withholdings in their pay cheques starting in July 2025. However, those who do not notice changes right away could enjoy the benefits when they file their 2025 tax returns in spring 2026.
Who Pays Tax In Canada?
Under Canadian law, if an individual earns an income and maintains any sort of residence in Canada, they are legally required to file a Canadian income tax return. This could include foreign workers, international students, and even some visitors apart from Canadian citizens and permanent residents (legal immigrants).
The immigration status of an individual has no bearing on whether the CRA will consider them a resident of Canada for tax purposes, according to a report by CIC news. Moreover, if an individual wishes to apply for Canadian citizenship, they must have a record of filing tax returns for the years in which they were legally required to.
Who Is Considered A Resident of Canada For Tax Purposes?
Per CRA rules, if an individual has a home in Canada, a spouse in Canada, or dependents in Canada, they qualify for primary residential ties with the country.
The CRA also considers secondary residential ties, if a person has personal property like a car, furniture, social ties like membership in a recreational or religious organisation, financial ties like a Canadian bank account, Canadian credit cards, public health insurance coverage with a Canadian province or territory, a driver's license issued by a Canadian province or territory or a Canadian passport.
Moreover, most temporary residents who live predominantly in Canada are also considered residents of Canada for tax purposes.
Will Indian Living In Canada Benefit From The Move?
According to the 2021 Census, 1.35 million people of Indian origin live in Canada, making it the fourth largest country in the world with an Indian community. India is also a top source country for Canadian immigrants. In 2023, 139,715 Indians immigrated to Canada, according to the NFAP analysis.
All people of Indian origin who qualify for the above criteria and fall in the low to middle income levels may benefit from the government's move.
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