Are you wondering what the Canada RIT deposit in your online banking/bank statement is and why you received it?
Canada RIT is a Canada Revenue Agency (CRA) payment. Canada RIT acronym stands for “Refund Income Tax.”
If you recently received a Canada RIT deposit, then you were found to be eligible for a tax refund after CRA assessed your taxes.
Canada RIT is not free money. What it means is that you paid more taxes than usual.
What does Canada RIT/RIF mean on my bank statement?
The income tax refund from CRA shows up as Canada RIT/RIF on your bank statement and direct deposit.
A snapshot from a bank statement is below
Your online direct deposit transaction will also show Canada RIT/RIF.
You will only receive the Canada RIT deposit if you filed an income tax return and, upon CRA’s assessment or reassessment, determined that you paid more in income taxes.
You can also receive a tax refund if you qualify for tax credits and claim them while filing your income tax returns.
Why did I receive Canada RIT?
There are several reasons why you received a tax refund or Canada RIT. Some of the reasons might be:
You didn’t claim eligible tax deductions on your payroll at work and hence paid more in taxes. You claimed tax credits later while filing income tax.
You quit work mid-year and were unemployed for a while. Since you didn’t receive any pay, you lowered your tax bracket for the year.
What should you do if you receive a Canada RIT deposit?
If you notice a Canada RIT deposit on your bank statement or direct deposit, verify the payment by visiting your CRA My Account.
You can view your tax refund amount on your CRA account overview page, as in the image below
Access the Notice of Assessment from your CRA account and verify your tax refund amount and credits.
If you weren’t eligible for a tax refund but received it anyway, immediately contact CRA regarding the payment.
Canada RIT payment dates
Canada RIT/RIF is a one-time payment you receive during the tax season between February and June. There are no specific Canada RIT payment dates.
CRA processes tax refunds within 2 weeks of filling your taxes online (8 weeks for paper-based tax returns)
You might not receive a tax refund until after 16 weeks if you filed taxes while outside Canada.
CRA may, at a later date, revisit your tax returns and determine additional refunds.
Is it good or bad to receive a tax refund?
Receiving a tax refund in the form of unexpected money may feel good.
But, receiving a tax refund means you lent your money to the government for a year without any interest and paid to file taxes to receive that money back.
You could have used that money instead of lending it to the government for investing or paying off debt.
You can always change your basic tax returns with your employer by claiming tax credits so that tax deductions on your pay-cheque are less.
You are good to go as long as you receive the money owed to you instead of owing it to the government.
You can use the unexpected tax refund however you choose to, as it’s your after-tax dollars.
Ways to use your income tax refund
Whether you were expecting a tax refund or not, your yearly tax returns can feel like a nice bonus.
With the extra cash, you can take a vacation or buy something you have been thinking about for a while.
You can also use the tax refund to build a nest egg by:
Investing in TFSA:
You can save any tax refund to a Tax-Free Savings Account (TFSA).
Any investment growth in your TFSA is tax-free, and you can withdraw your contributions at any time without paying taxes on your capital gains.
The TFSA contribution limit for 2023 is $6,500.
Investing in RRSP:
You can invest your tax refund into an RRSP and claim tax deductions for the upcoming year. Registered Retirement Savings Plan (RRSP) contributions are tax-deductible.
The RRSP contribution limit for 2023 is 18% of income earned in the previous tax year, up to a maximum of $31,560.
Paying off debt:
You can pay off any debt you owe, like a credit card or car loan, and lower your balance to save on high-interest fees.
You can use any money you save to build a nest egg by lowering your bills.
Creating an Emergency Fund:
If you don’t have at least 3 months’ worth of expenses in your savings, you can use your tax refund to set up an emergency fund.
You can set up a new bank account for emergencies so you don’t accidentally spend all your money from your chequing account.
A few banks in Canada offer no-fee banking, and you can utilize one like Tangerine or EQ bank to set up an emergency fund.
Canada RIT FAQs
How much is the Canada RIT?
Canada RIT deposit varies for each individual as the excess taxes deducted is not the same for everyone.
Who is eligible for Canada RIT?
Individual Canadians and businesses who file tax returns may be eligible for Canada RIT payments.
The tax refund amount will vary based on your financial situation, income tax paid, and tax deductions you qualify for.
The average tax refund per return in Canada between February 6 and April 11, 2023, was $2066.
Even if you didn’t receive employment income, you should file your tax returns to qualify for other government benefits like GST/HST payments, Climate Action Incentive, and Canada Child Benefits.
Is the Canada RIT Taxable?
Canada RIT payment is not taxable; you don’t need to report it on your next tax return.
How to set up a Canada RIT direct deposit?
Are you still receiving your tax refund via cheque? Cheques usually take longer to reach and could get lost.
A direct deposit is the fastest way to receive tax refunds and other government benefits.
You can sign up for a direct deposit through:
- Your bank
- Your CRA My account
- The MyCRA app
What is Canada RIF?
Canada RIF acronym also refers to a tax refund and is used interchangeably with Canada RIT or both as Canada RIT/RIF.
Final Thoughts
As long as you are entitled to a tax refund based on your yearly tax filing, you’ll receive a Canada RIT deposit.
The Canada RIT deposit is one of many abbreviations for federal government payments you receive.
Let me know in the comments if you received a Canada RIT/RIF deposit.
And if this post helped you learn something new, share it with others.
Written by Sunil Raaj.