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The nominal interest rate minus the inflation rate, i.e. the rate of interest excluding the effects of inflation. All else being equal, the higher the current inflation rate, the higher nominal interest rates will be. With a nominal interest rate of 7 per cent on a loan and inflation at 2 per cent, the real interest rate is 5 per cent (7 - 2 = 5). Lenders will often use predicted inflation rates to calculate the expected real interest rate for a given nominal interest rate. The creditworthiness of the borrower and the perceived risk of the investment are other major factors affecting interest rates.
Where a tax credit is refundable, the portion of the credit which is not needed to reduce a taxpayer's tax liability (because it is already zero) may be paid to the taxpayer. The goods and services tax credit is refundable.
Registered Education Savings Plan (RESP)
An investment plan that allows savings to grow tax-free until a child is ready to pursue a post-secondary education, at which time the money is withdrawn to help finance the costs.
Registered Pension Plan (RPP)
RPPs are pension plans for employees sponsored by employers or unions and usually funded through contributions by both employees and employers. RPPs must satisfy certain conditions and be registered for the purposes of the federal Income Tax Act. Contributions to RPPs are tax deductible, the investment income in them is tax-deferred and payments from them are taxable. For more information, visit the Canada Customs and Revenue Agency Registered Retirement Savings Plans Web page.
RRSPs are savings plans for individuals, including the self-employed, that have been registered for the purposes of the federal Income Tax Act. RRSP contribution limits are based on earned income. RRSPs provide retirement income at retirement based on accumulated contributions and return on investment in the plan. Contributions to an RRSP are tax deductible, the investment income in it is tax-deferred and payments from it are taxable. Annual contributions are limited to 18 per cent of earnings up to a maximum of $13,500. RRSP contributors may also belong to a registered pension plan (RPP), but their RRSP contribution limits are reduced by the amount of a pension adjustment that is a standardized measure of the RPP contributions made by and on behalf of the RPP member. Unused RRSP contribution room may be fully carried forward to future years. For more information, visit the Canada Customs and Revenue Agency Registered Retirement Savings Plans Web page.
The resource allowance provides an annual deduction to mining and oil and gas producers. It is calculated as 25 per cent of a taxpayer's annual resource profits, computed after operating costs and capital cost allowances, but before the deduction of exploration expenses, development expenses, earned depletion and interest expenses. The resource allowance measure gives the provincial governments room to impose royalties or mining taxes on the production of natural resources. The non-deductibility of these charges, coupled with the resource allowance, means that these provincial charges do not affect the level of federal income taxes payable.
In banking, a location where banking services are provided to individuals.
In general terms, a lump sum payment made by an employer to an individual on termination of employment.
Retiring Allowance Rollover
A retiring allowance rollover can be transferred to a registered retirement savings plan (RRSP) to defer tax. This is in addition to the normal limits for RRSP contributions. A portion of a retiring allowance may be transferred to an RRSP. An individual may transfer up to $2,000 for each year of service before 1996 plus up to $1,500 for each year of service before 1989 in which no pension or deferred profit-sharing plan benefits were earned. The 1995 budget eliminated the rollover for years of service after 1995 given the maturation of pension plans and the ability to carry forward unused RRSP limits.
Unlike an ordinary mortgage, which involves payments by the borrower to the lender, a reverse mortgage involves payments by the lender to the borrower. It is an arrangement whereby homeowners get cash (usually in the form of monthly payments or a lump sum) in return for a mortgage on their home, which is used as security against the loan. This is a strategy sometimes used by retired homeowners who need to supplement their income. A reverse mortgage is one way of tapping into the value of a home.
The potential of losing one's money or the uncertainty of future returns.
Rule of Origin
The term for the set of laws, regulations and administrative procedures that determine a product's country of origin. A decision by a customs authority on origin can determine whether a shipment falls within a quota limitation, qualifies for a tariff preference or is affected by an anti-dumping duty. These rules can vary from country to country.