Earn ₹191.75 monthly Tax-free income from TFSA: Do you want to earn ₹191.75 per month without paying tax? If yes, then a Tax-Free Savings Account (TFSA) can be a great option for you. In this article, we will explain to you in simple language how you can use your TFSA so that you get a fixed income every month. Let’s understand the whole process of “Earn ₹191.75 monthly Tax-free income from TFSA” and know which smart investments will be beneficial for you.
TFSA is a special account in Canada in which you can invest your savings and you will not have to pay any tax on whatever money grows in this account. Meaning, if you invest money in stocks, bonds or mutual funds in it and you get dividend or capital gain, then it will be completely tax-free. Now imagine, if you deposit a little bit of money in it every year and invest it in the right place, you can easily create a stable tax-free income!
What Is TFSA?
A program created by the Canadian government to assist people in saving money tax-free is the Tax-Free Savings Account (TFSA). The TFSA, which was first introduced in 2009, lets your investments grow tax-free, so you keep all dividends, interest, and capital gains that are made within the account.
Because of this, the TFSA is a great way to generate passive income, particularly when investing in dependable stocks that pay dividends. One of the most useful and adaptable tools available to Canadians is the TFSA, whether you’re saving for retirement, a significant purchase, or just to increase your wealth.
Formula to Earn ₹191.75 monthly Tax-free income from TFSA
If you want to keep getting ₹191.75 every month, then you have to adopt a special strategy. You will get this income from dividends from stocks.
Suppose, you invest in stocks that give you 5% annual return. This means that if you invest ₹46,020, you will get ₹2,301 every year, which will be ₹191.75 every month.
How was this calculation done?
- Annual income target: ₹2,301
- Dividend yield: 5%
- Required investment: ₹2,301 ÷ 0.05 = ₹46,020
- If you increase this investment gradually, your income will also increase.
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How to generate tax-free income from TFSA?
Now the question arises, how to do all this? For this, some steps have to be followed.
Step 1: Use your TFSA account fully
First of all, you have to check how much contribution space you have in TFSA. For the year 2024, the limit is ₹7,000 for every Canadian and if you started from 2009, then your total limit can be ₹95,000.
If you haven’t put much money into your TFSA yet, start filling it up slowly so you can earn as much tax-free income as possible.
Step 2: Invest in the right stocks
Now the question is where to invest? You need to find stocks that pay dividends every year and have a good track record.
Some of the best dividend stocks
- Fortis Inc. (TSX:FTS) – This is a utility company that has been raising dividends for the past 51 years. Its dividend yield is around 4%.
- Enbridge Inc. (TSX:ENB) – This is a strong energy company with a dividend yield of around 6.5%.
- Canadian Natural Resources (TSX:CNQ) – This is a major oil and gas company with a dividend yield of 4.5%.
- Sienna Senior Living (TSX:SIA) – This is a healthcare company with a dividend yield of 7%.
- Northwest Healthcare Properties REIT (TSX:NWH.UN) – This is a company in the real estate sector and its dividend yield is 8%.
If you invest in these companies, your money will be safe and you will get a good income every month.
Step three: Diversify your investments
“Don’t put all your eggs in one basket!” This saying also applies to investments. If you invest in only one sector, you may face more risk. Therefore, you should invest your money in different places:
- ETFs – It gives you the opportunity to invest in many companies simultaneously.
- Bonds – It gives you safety and balances your portfolio.
- REITs – It gives you the opportunity to invest in real estate and they also have a high yield.
If you diversify properly, your income will also remain stable and the risk will also be low.
Step 4: Take advantage of DRIP
DRIP means Dividend Reinvestment Plan. This is a great way to get more shares from dividends.
This means that the dividend you receive is automatically reinvested in the same stock and your investment keeps growing. This makes your money grow quickly and after a few years your income can also increase manifold.
Step 5: Check your portfolio regularly
Investment does not mean that you invest money once and forget about it. You have to check from time-to-time which stocks are doing well and which are not. If the performance of a stock starts falling, then you can replace it with another good stock.
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Benefits of tax-free income from TFSA
There are many benefits of investing in TFSA:
| No tax | You will not have to pay a single rupee tax on whatever income is generated. |
| Flexibility | You can withdraw money whenever you want, and can also invest it back. |
| Good growth | If you use a DRIP, your money grows quickly. |
| No impact on government benefits | TFSA income will not affect your government pension or Old Age Security (OAS). |
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Conclusion
If you invest smartly in your TFSA, you can easily Earn ₹191.75 monthly Tax-free income from TFSA or more every month. All you need to do is choose the right stocks, diversify your portfolio and do long-term planning.
FAQs
In a TFSA, are all dividends tax-free?
Yes, Canadian corporations are exempt from paying taxes on dividends received within a TFSA. Foreign dividends, however (e.g. G. U. S. stocks), withholding taxes might apply. It is essential to comprehend the tax ramifications of foreign investments.
What occurs if I make too many contributions to my TFSA?
The monthly penalty for over-contributions is one percent of the excess amount. Always use the CRA to confirm your limit.
In a TFSA, can I lose money?
Yes, if your investments lost To reduce risks, diversification and prudent asset selection are crucial.
What effect does inflation have on TFSA returns?
Your returns lose purchasing power due to inflation. Inflationary pressures can be mitigated by selecting investments with higher yields, such as dividend stocks or REITs.
