The amount of withholding income tax is based upon the size of your withdrawal. This is so that you are paying the CRA a level of tax that is proportional to the amount withdrawn and included as taxable income in your current income tax return.
You should never assume that the amount of withholding tax deducted from your withdrawal is sufficient to cover the resulting income tax owing. The withholding deducted may not be sufficient to cover the tax you owe at your income tax bracket. You may have to pay additional income tax when you complete and file your annual income tax return.
Below is a reference chart with the withdrawal thresholds and the required level of withholding tax to be deducted:
|Amount Withdrawn||CRA Withholding Tax Deducted||Combined CRA & Quebec Withholding Tax|
|Up to $5,000||10% Withholding Tax||21% Withholding Tax|
|$5,000 to $15,000||20% Withholding Tax||26% Withholding Tax|
|Amounts over $15,000||30% Withholding Ta|