Dan Brtolotti CFP CIM B.A. English University of Waterloo - St. Jerome's University wrote this article. I don't fathom third row. RRSP is taxed at withdrawal. Thus how is tax refunded when you deposit in RRSP? What's the "Tax refund on RRSP contribution"?

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    Not familiar enough with Canadian taxes/RRSP to answer, but I suspect it's because tax was already paid on the amount, but it is exempt from that tax because it was then contributed to RRSP, so the tax that was paid gets refunded (note the refund is approximately 21% of the contribution)
    – yoozer8
    Nov 23, 2019 at 15:09

2 Answers 2


When you contribute money to an RRSP you get a refund of the income tax that you paid on it. This is why RRSPs can be thought of as a tax-deferral system, i.e. you don’t pay income tax on it in the present, but you will have to pay it in the future. Many people fixate on this aspect and complain about how they’ll have to pay taxes on their withdrawals at retirement— what they ignore is the fact that you can invest the initial tax rebate that you get and let that grow between when you initially contributed to the RRSP to when you drew it down.


When you make a RRSP contribution, the amount of the contribution is subtracted in the calculation of the taxible income.

For example, the person in the 21% MTR bracket who has an income of $30,000 and makes a contribution of $5,400 has reduced his taxible income from $30,000 to $24,600 (30000 - 5400).

The calculation of tax on an income of $24,600 is 21% * 24,600. The result of this is $5166 of tax owing.

Since, presumably, there has been deductions at source and those deductions were based on the pre-RRSP contribution income of $30,000, the amount withheld at source would probably be $6300.

In other words, the tax withheld at source on the income is $6300 while the actual tax owing is $5166. The difference between the two is $1,134. This is the amount of money which CRA needs to pay as a refund to the taxpayer.

This is the amount which is in the cell intersecting $30,000 and tax refund on RRSP contribution.

The same thing happens for the two other examples, which you can easily work through with a pen and paper or a spreadsheet.

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