Once you settle in Canada and your life is somewhat established, there is a name you are bound to hear at the bank at least once. TFSA (Tax-Free Savings Account)Although the name includes "savings," it is actually not just an account for holding cash, but rather closer to a "tax-free basket" where you can hold products such as deposits, GICs, ETFs, and stocks. It is not difficult if you understand the basics accurately.
1. Biggest Feature — No tax when increasing or decreasing
Since the money contributed to a TFSA is already tax-paid, there is no tax deduction at the time of contribution (this is different from an RRSP). Instead, interest, dividends, and investment earnings generated within the account are tax-free, and you can withdraw funds at any time without paying taxes. Since the withdrawn amount is not considered income, it does not directly affect the calculation of income-based benefits such as OAS.
2. You must check 'My Limit' for the payment limit.
- The annual limit is determined each year, and the annual limit for 2026 is $7,000.
- Unused limits do not disappear and continue to be carried over.
- The limit accrues starting from the year you are 18 years of age or older and a resident under Canadian tax law. The limit begins from the year you immigrate to Canada, and the limit from the year prior to arrival is not applied. Please make sure to remember this, as it is the point that immigrants find most confusing.
- You can open multiple TFSAs at different financial institutions, but the combined limit is only one.
3. This is the place you need to be most careful when putting the money back in.
Amounts withdrawn this year do not immediately return to the limit; they are added to the new limit only on January 1st of the following year. If you deposit money back into the account within the same year while the limit is full, it constitutes an overpayment, and a monthly tax of 113T may be applied to the excess amount. If you wish to transfer funds to another bank, it is safer to apply for a 'direct transfer' through a financial institution rather than withdrawing and depositing the money directly.
4. How to check my limit
You can check this on CRA My Account, but the CRA also advises that the actual figures may differ because reports from financial institutions are reflected late. The most reliable way to prevent overpayments is to get into the habit of keeping a separate record of your deposits and withdrawals.
A TFSA is an account that can be used for a wide range of purposes, from short-term emergency funds to long-term investments. However, this article provides general information for educational purposes only and is not personal financial advice. Please consult with a certified financial advisor or tax professional to make an informed decision based on your specific situation.
Source: Wealthsimple — TFSA FAQs: 2026 limits, withdrawals and rules https://www.wealthsimple.com/en-ca/learn/tfsa-faqs
Source: BMO — What's a Tax-Free Savings Account (TFSA) https://www.bmo.com/en-ca/main/personal/investments/learning-centre/what-is-a-tfsa/ | 
