RRSP for NRIs
RRSP for NRIs: Can You Contribute and What Happens if You Leave Canada?
Many Non-Resident Indians (NRIs) who once lived and worked in Canada still hold an RRSP (Registered Retirement Savings Plan). But questions often arise when they move abroad .Can you still contribute? How are withdrawals taxed? And what happens to your RRSP when you leave Canada permanently? This guide answers all those questions in clear, simple terms. Learn about RRSP contribution rules for non-residents, tax implications, withdrawal procedures, and how the Canada–India tax treaty can help you avoid double taxation.
Learn everything about RRSP for Non-Resident Indians (NRIs) — contributions, withdrawals, and tax rules after leaving Canada. Understand how RRSP works for NRIs under the Canada–India tax treaty.
1. What is an RRSP and who can contribute to it?
Short Answer: RRSP stands for Registered Retirement Savings Plan, available to Canadian residents with earned income.
Long Answer: An RRSP is a tax-deferred savings plan that allows Canadian residents to contribute a portion of their income toward retirement. Contributions are tax-deductible, and investment growth inside the RRSP is not taxed until withdrawal. Non-residents cannot usually contribute unless they have eligible Canadian income and unused RRSP room.
Long Answer: An RRSP is a tax-deferred savings plan that allows Canadian residents to contribute a portion of their income toward retirement. Contributions are tax-deductible, and investment growth inside the RRSP is not taxed until withdrawal. Non-residents cannot usually contribute unless they have eligible Canadian income and unused RRSP room.
2. Can NRIs continue contributing to RRSP after leaving Canada?
Short Answer: Only if they have Canadian income and contribution room.
Long Answer: Once you become a non-resident, you can still contribute to your existing RRSP if you have unused contribution room or Canadian-source income such as employment or business income. However, if you have no Canadian income, you cannot earn new contribution room.
Long Answer: Once you become a non-resident, you can still contribute to your existing RRSP if you have unused contribution room or Canadian-source income such as employment or business income. However, if you have no Canadian income, you cannot earn new contribution room.
3. What happens to my RRSP when I become a non-resident?
Short Answer: Your RRSP stays active and tax-deferred in Canada.
Long Answer: When you leave Canada, your RRSP remains registered and continues to grow tax-free within Canada. However, withdrawals will be subject to non-resident withholding tax, usually at a flat rate of 25%.
Long Answer: When you leave Canada, your RRSP remains registered and continues to grow tax-free within Canada. However, withdrawals will be subject to non-resident withholding tax, usually at a flat rate of 25%.
4. Do I lose my RRSP contribution room after leaving Canada?
Short Answer: No, your unused RRSP room stays.
Long Answer: You keep your accumulated RRSP contribution room even if you move abroad. But you can only create new contribution room if you earn Canadian income and file a Canadian tax return.
Long Answer: You keep your accumulated RRSP contribution room even if you move abroad. But you can only create new contribution room if you earn Canadian income and file a Canadian tax return.
5. Is RRSP withdrawal taxed if I become an NRI?
Short Answer: Yes, a withholding tax applies.
Long Answer: Withdrawals from your RRSP as a non-resident are subject to a 25% withholding tax by the Canada Revenue Agency (CRA). Some countries with tax treaties, like India, may reduce this rate to 15%.
Long Answer: Withdrawals from your RRSP as a non-resident are subject to a 25% withholding tax by the Canada Revenue Agency (CRA). Some countries with tax treaties, like India, may reduce this rate to 15%.
6. Can I transfer my RRSP funds to my Indian account?
Short Answer: Yes, but after tax deduction.
Long Answer: You can withdraw your RRSP funds and transfer the balance to your Indian bank account after paying the applicable withholding tax in Canada. You must also report the income in India if you are a tax resident there.
Long Answer: You can withdraw your RRSP funds and transfer the balance to your Indian bank account after paying the applicable withholding tax in Canada. You must also report the income in India if you are a tax resident there.
7. Can I convert RRSP to RRIF after leaving Canada?
Short Answer: Yes, you can.
Long Answer: Even if you’re a non-resident, you can convert your RRSP into a Registered Retirement Income Fund (RRIF) at age 71 or earlier. RRIF withdrawals will also be taxed at 25% unless reduced by a tax treaty.
Long Answer: Even if you’re a non-resident, you can convert your RRSP into a Registered Retirement Income Fund (RRIF) at age 71 or earlier. RRIF withdrawals will also be taxed at 25% unless reduced by a tax treaty.
8. Does India tax RRSP income for returning Indians?
Short Answer: Yes, it can be taxable.
Long Answer: Under Indian tax law, RRSP withdrawals are treated as foreign income and are taxable in India. However, you can claim a foreign tax credit for the tax already paid in Canada under the Double Taxation Avoidance Agreement (DTAA).
Long Answer: Under Indian tax law, RRSP withdrawals are treated as foreign income and are taxable in India. However, you can claim a foreign tax credit for the tax already paid in Canada under the Double Taxation Avoidance Agreement (DTAA).
9. What is the tax rate on RRSP withdrawals for non-residents?
Short Answer: Usually 25%, sometimes lower.
Long Answer: The standard withholding tax rate is 25%, but Canada’s tax treaties with countries like India may reduce it to 15%. Always confirm based on your residency and treaty status.
Long Answer: The standard withholding tax rate is 25%, but Canada’s tax treaties with countries like India may reduce it to 15%. Always confirm based on your residency and treaty status.
10. Can I contribute to RRSP from foreign income?
Short Answer: No, only Canadian income qualifies.
Long Answer: RRSP contribution room is based on Canadian earned income (employment, self-employment). Foreign income, like salary earned in India or the UK, doesn’t count toward RRSP contribution limits.
Long Answer: RRSP contribution room is based on Canadian earned income (employment, self-employment). Foreign income, like salary earned in India or the UK, doesn’t count toward RRSP contribution limits.
11. What if I withdraw my entire RRSP after leaving Canada?
Short Answer: You’ll pay 25% tax upfront.
Long Answer: If you withdraw your entire RRSP as a lump sum after becoming non-resident, CRA will withhold 25% tax. The remainder can be transferred abroad, but you may owe more tax depending on your country of residence.
Long Answer: If you withdraw your entire RRSP as a lump sum after becoming non-resident, CRA will withhold 25% tax. The remainder can be transferred abroad, but you may owe more tax depending on your country of residence.
12. Can I still get RRSP tax deductions as an NRI?
Short Answer: Only if you file a Canadian tax return.
Long Answer: If you contribute to your RRSP while earning Canadian income, you may still claim a tax deduction. But if you’re fully non-resident and not filing a Canadian tax return, deductions don’t apply.
Long Answer: If you contribute to your RRSP while earning Canadian income, you may still claim a tax deduction. But if you’re fully non-resident and not filing a Canadian tax return, deductions don’t apply.
13. Can I keep my RRSP investments in mutual funds or stocks?
Short Answer: Yes, you can.
Long Answer: Your RRSP investments—mutual funds, ETFs, or stocks—can stay invested even after you become a non-resident. Growth continues tax-deferred until withdrawal.
Long Answer: Your RRSP investments—mutual funds, ETFs, or stocks—can stay invested even after you become a non-resident. Growth continues tax-deferred until withdrawal.
14. Does my RRSP get closed automatically if I move abroad?
Short Answer: No, it stays open.
Long Answer: The RRSP does not close automatically when you leave Canada. You can keep it until you decide to withdraw or convert it to a RRIF.
Long Answer: The RRSP does not close automatically when you leave Canada. You can keep it until you decide to withdraw or convert it to a RRIF.
15. How is RRSP different from TFSA for non-residents?
Short Answer: RRSP is better maintained as NRI; TFSA is not.
Long Answer: RRSP can continue growing tax-deferred as a non-resident, but TFSA contributions are not allowed after leaving Canada and may attract penalties if made while non-resident.
Long Answer: RRSP can continue growing tax-deferred as a non-resident, but TFSA contributions are not allowed after leaving Canada and may attract penalties if made while non-resident.
16. What forms do I need for RRSP withdrawal as a non-resident?
Short Answer: NR4 or NR5 forms.
Long Answer: You’ll typically receive an NR4 form reporting the RRSP withdrawal and tax withheld. If you want to apply for a reduced withholding rate, you can submit Form NR5 to CRA before withdrawal.
Long Answer: You’ll typically receive an NR4 form reporting the RRSP withdrawal and tax withheld. If you want to apply for a reduced withholding rate, you can submit Form NR5 to CRA before withdrawal.
17. Can I avoid double taxation on RRSP income in India?
Short Answer: Yes, through DTAA relief.
Long Answer: Canada and India have a Double Taxation Avoidance Agreement. You can claim a tax credit in India for tax already paid in Canada, avoiding double taxation.
Long Answer: Canada and India have a Double Taxation Avoidance Agreement. You can claim a tax credit in India for tax already paid in Canada, avoiding double taxation.
18. Can I appoint someone to manage my RRSP from abroad?
Short Answer: Yes, via a Canadian advisor or bank.
Long Answer: You can authorize your Canadian financial advisor or institution to manage your RRSP investments while you live abroad. Ensure your contact and tax-residency details are updated.
Long Answer: You can authorize your Canadian financial advisor or institution to manage your RRSP investments while you live abroad. Ensure your contact and tax-residency details are updated.
19. Does CRA need to be informed about my departure?
Short Answer: Yes, it’s recommended.
Long Answer: When leaving Canada permanently, inform CRA of your non-resident status using Form NR73. It helps determine your tax obligations and ensures proper treatment of RRSP and other assets.
Long Answer: When leaving Canada permanently, inform CRA of your non-resident status using Form NR73. It helps determine your tax obligations and ensures proper treatment of RRSP and other assets.
20. What happens to RRSP at age 71 if I live abroad?
Short Answer: It must be converted to a RRIF or annuity.
Long Answer: Regardless of where you live, RRSPs must be converted to a RRIF or annuity by December 31 of the year you turn 71. Withdrawals will then be taxed at the non-resident rate.
Long Answer: Regardless of where you live, RRSPs must be converted to a RRIF or annuity by December 31 of the year you turn 71. Withdrawals will then be taxed at the non-resident rate.
21. Can I withdraw from RRSP before leaving Canada?
Short Answer: Yes, but it’s taxable.
Long Answer: You can withdraw funds from your RRSP before moving abroad, but it will be subject to regular withholding tax. Doing so while still resident may allow you to offset it with other deductions.
Long Answer: You can withdraw funds from your RRSP before moving abroad, but it will be subject to regular withholding tax. Doing so while still resident may allow you to offset it with other deductions.
22. Can I transfer my RRSP to my spouse after leaving Canada?
Short Answer: Yes, under spousal RRSP rules.
Long Answer: If you already have a spousal RRSP, contributions and withdrawals can still occur under the same plan rules, but the same non-resident tax treatment applies once you move abroad.
Long Answer: If you already have a spousal RRSP, contributions and withdrawals can still occur under the same plan rules, but the same non-resident tax treatment applies once you move abroad.
23. Is there a penalty for keeping RRSP as an NRI?
Short Answer: No penalty.
Long Answer: There is no penalty for maintaining your RRSP while living abroad. You just can’t earn new room or claim deductions without Canadian income.
Long Answer: There is no penalty for maintaining your RRSP while living abroad. You just can’t earn new room or claim deductions without Canadian income.
24. Can I use RRSP for buying a home after leaving Canada?
Short Answer: No, only Canadian residents qualify.
Long Answer: The Home Buyers’ Plan (HBP) allows RRSP withdrawals to buy a first home, but it applies only to Canadian residents. Non-residents are not eligible for this program.
Long Answer: The Home Buyers’ Plan (HBP) allows RRSP withdrawals to buy a first home, but it applies only to Canadian residents. Non-residents are not eligible for this program.
25. Can I use RRSP funds for education under the Lifelong Learning Plan?
Short Answer: No, residency required.
Long Answer: The Lifelong Learning Plan allows RRSP withdrawals for education only if you are a Canadian resident. NRIs cannot use this benefit.
Long Answer: The Lifelong Learning Plan allows RRSP withdrawals for education only if you are a Canadian resident. NRIs cannot use this benefit.
26. What happens if I move back to Canada later?
Short Answer: RRSP benefits restart.
Long Answer: Once you become a resident again, you can contribute to RRSP as usual, create new contribution room from Canadian income, and claim deductions in your tax return.
Long Answer: Once you become a resident again, you can contribute to RRSP as usual, create new contribution room from Canadian income, and claim deductions in your tax return.
27. Do banks allow non-residents to hold RRSPs?
Short Answer: Yes, most do.
Long Answer: Major Canadian banks and financial institutions allow non-residents to maintain their RRSP accounts, though some may restrict trading options depending on your new country of residence.
Long Answer: Major Canadian banks and financial institutions allow non-residents to maintain their RRSP accounts, though some may restrict trading options depending on your new country of residence.
28. Should I withdraw or keep my RRSP after moving abroad?
Short Answer: Depends on your goals and taxes.
Long Answer: Keeping your RRSP allows tax-deferred growth, while withdrawing gives liquidity but triggers tax. If your new country taxes RRSP heavily, consider partial withdrawal or RRIF conversion for better control.
Long Answer: Keeping your RRSP allows tax-deferred growth, while withdrawing gives liquidity but triggers tax. If your new country taxes RRSP heavily, consider partial withdrawal or RRIF conversion for better control.
29. Can I open a new RRSP after leaving Canada?
Short Answer: Only if you have Canadian income.
Long Answer: You can open or contribute to an RRSP only if you continue to earn income in Canada and file a Canadian tax return. Otherwise, new contributions are not allowed.
Long Answer: You can open or contribute to an RRSP only if you continue to earn income in Canada and file a Canadian tax return. Otherwise, new contributions are not allowed.
30. How can I minimize tax on RRSP withdrawal as a non-resident?
Short Answer: Use tax treaties or phased withdrawals.
Long Answer: To reduce tax impact, consider withdrawing gradually through a RRIF or using treaty benefits for reduced withholding. Consult a tax professional familiar with both Canadian and Indian tax laws for optimal planning.
Long Answer: To reduce tax impact, consider withdrawing gradually through a RRIF or using treaty benefits for reduced withholding. Consult a tax professional familiar with both Canadian and Indian tax laws for optimal planning.
