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Step 6 - Refund or Balance owing

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We have archived this page and will not be updating it.

You can use it for research or reference.

Generally, the tax you have to pay is based on your taxable income (line 260). Use Schedule 1, Federal Tax Calculation, to determine your federal income tax and federal individual surtax. For details, see the section called "Schedule 1, Federal Tax Calculation," on page 38.

Minimum tax

Read the following information to determine if minimum tax applies to you, and if you will need to complete Form T691, Calculation of Minimum Tax.

Minimum tax limits the tax advantage you can receive in a year from certain incentives. You have to pay minimum tax if this tax is more than the federal tax you calculate in the usual manner. You are allowed a basic exempt amount of $40,000 in calculating your taxable income for this tax. Minimum tax does not apply to persons who died in 1996.

Below are the most common situations that may make you have to pay minimum tax:

A. You claimed any of the following tax credits:

B. You reported a taxable capital gain on line 127.

C. You claimed any of the following:

In most cases, you can determine whether you have to pay this tax by totalling the deductions mentioned in paragraph C above and one-third of the taxable capital gain amount on line 044 of Schedule 3. If the total is $40,000 or less, you probably do not have to pay minimum tax. If the total is more than $40,000, you may have to pay this tax. To calculate if you have to pay minimum tax, get Form T691, Calculation of Minimum Tax, from us.

Example
Sergio claimed a deduction in 1996 for transferring $50,000 of his retiring allowance to his RRSP. Because this deduction is more than $40,000, Sergio may have to pay minimum tax. To find out, he should complete Form T691, Calculation of Minimum Tax. Tax Tip
If you paid minimum tax for any years from 1989 to 1995, but you do not have to pay minimum tax for 1996, you may be able to claim a credit against your 1996 taxes for all or part of the minimum tax you paid in those years. See line 504 for details.

Lines 409 and 410 - Federal political contribution tax credit

Enter on line 409 the total you contributed during 1996 to a registered federal political party or a candidate for election to the House of Commons. Use the following chart to calculate your credit. However, if your total political contributions are $1,150 or more, simply enter $500 on line 410.

Federal political contribution tax credit

Receipts - Attach to your paper return your official receipts, your T5013 slips showing an amount in box 36, or financial statements showing an amount a partnership allocated to you, whichever apply. If you are using EFILE (see "Filing your return" on page 6) show your receipts and statements to your EFILE service provider.

Line 412 - Investment tax credit

You may be eligible for this credit if any of the following apply to you:

How to claim

Attach to your return a completed copy of Form T2038(IND.), Investment Tax Credit (Individuals) 1995 and Subsequent Years. For more information on the investment tax credit, get either the income tax guide called Farming Income or the guide called Fishing Income. Both guides also contain Form T2038(IND.).

Tax Tip
You may be able to reduce your federal individual surtax by any unclaimed investment tax credit, or claim a refund of your unused investment tax credit. For details, see lines 419 and 454.

Lines 413 and 414 - Labour-sponsored funds tax credit

You may be able to claim a credit if you became the first registered holder of (acquired, or irrevocably subscribed to and paid for) an approved share of the capital stock of a prescribed labour-sponsored venture capital corporation at any time after 1995, but before March 2, 1997.

If you became the first registered holder of an approved share after 1995, but before March 1, 1996, and claimed the credit for it on your 1995 return, you cannot claim a credit for that share on your 1996 return.

Enter your net cost on line 413. Net cost is the amount you paid for your shares, minus any government assistance, other than federal or provincial tax credits on the shares. For shares of which you became the first registered holder before March 6, 1996, enter on line 414 your allowable credit, which cannot be more than 20% of the net cost (to a maximum of $1,000).

Red line

Under proposed changes, the allowable credit for shares of which you became the first registered holder after March 5, 1996, cannot be more than 15% of the net cost, to a maximum of $525. The 1996 credit for these shares is also limited to $525 minus the credit for any shares of which you became the first registered holder after 1995, but before March 6, 1996. In addition, these shares have a new minimum holding period.

Red line

Use the chart below to calculate the maximum credit you can claim for 1996, for shares of which you became the first registered holder after December 31, 1995, but before March 2, 1997.

Labour-sponsored funds tax credit

Receipts - To make a claim, you have to file with your paper return either a T5006 slip, Statement of Registered Labour-Sponsored Venture Capital Corporation Class A Shares, or an official provincial slip. If you are using EFILE (see "Filing your return" on page 6) show your slip to your EFILE service provider.

Tax Tip
Some provinces offer a similar tax credit. If so, you may be able to get a further credit against your provincial tax. See the pink forms in the forms booklet (or, if you were a resident of Quebec, the guide for your provincial return) for details.

Line 419 - Federal individual surtax

You have to pay a federal individual surtax of 3% of your basic federal tax after deducting any federal forward-averaging tax credit you are entitled to claim on your 1996 return. If your basic federal tax, minus your federal forward-averaging tax credit, is more than $12,500, you have to pay an extra surtax of 5% (for a total of 8%) on the amount over $12,500. Use Schedule 1 to calculate your federal individual surtax.

Tax Tip
If you can claim a foreign tax credit or investment tax credit, you may be able to use the unclaimed part of these credits to reduce the federal individual surtax you have to pay. For details, get Form T2209, Calculation of Federal Foreign Tax Credits, and Form T2038(IND.), Investment Tax Credit (Individuals) 1995 and Subsequent Years.

Line 421 - Canada Pension Plan contributions payable on self-employment and other earnings

Enter the Canada Pension Plan contributions you have to pay, as calculated on Schedule 8.

If you were a resident of Quebec, this line does not apply to you. You will enter on your Quebec provincial return the Quebec Pension Plan contributions you have to pay.

Line 422 - Social benefits repayment

Enter the amount of social benefits you have to repay, as calculated in the charts under line 235 in this guide.

Line 428 - Provincial or territorial tax

If you were not a resident of Quebec, use the pink forms included in the forms booklet to calculate your provincial or territorial tax. If you live in British Columbia, Manitoba, Nova Scotia, or Ontario, use Form T1C- TC. Otherwise, use Form T1C.

If you were a resident of Quebec, this line only applies to you if you had income from a business with a permanent establishment outside Quebec. You will have to file a Quebec provincial return to calculate your provincial tax.

Tax payable to more than one province

If you had income from a business with a permanent establishment outside your province or territory of residence, use Form T2203, Calculation of Tax for 1996 - Multiple Jurisdictions, to calculate the provincial or territorial taxes you have to pay. Attach a completed copy of the form to your return.

If you had income from a business with a permanent establishment in Quebec, you can claim a refundable Quebec tax abatement. See "Line 440 - Refundable Quebec abatement" for details.

Line 437 - Total income tax deducted

Enter the total of the amounts shown in the "Income tax deducted" box from all of your information slips. If you were a resident of Quebec, do not include on this return any of your Quebec provincial income tax deducted.

If you were not a resident of Quebec, but you had Quebec provincial income tax withheld from your income, attach to your return a copy of your provincial information slip. Include these amounts on this line.

Note
If you paid foreign taxes, you have to complete Method B of Schedule 1, Federal Tax Calculation, to claim your foreign tax credit.

Line 438 - Tax transfer for residents of Quebec

If you were a resident of Quebec who, during 1996, earned income outside Quebec, such as employment income, tax may have been deducted for a province or territory other than Quebec. However, if you should be using the Quebec income tax package, as explained on page 5, you owe your provincial tax to Quebec. You can transfer, to the Province of Quebec, up to 45% of the income tax deducted on your information slips that payers outside Quebec issued.

Enter the amount you want to transfer (up to the maximum) on line 438 of your federal return and on line 454 of your Quebec provincial return. If the taxable income on your federal return (line 260) is zero, no transfer is necessary.

Line 440 - Refundable Quebec abatement

The Quebec abatement is provided under the federal-provincial fiscal arrangement, in place of direct cost-sharing by the federal government. It reduces your federal income tax, and may even give you a refund.

If you were a resident of Quebec and you did not have income from a business with a permanent establishment outside Quebec, your refundable Quebec abatement is 16.5% of the amount on either line 15 or line 26 of Schedule 1, whichever applies.

If you had income from a business with a permanent establishment outside Quebec, or you were not a resident of Quebec and you had income from a business with a permanent establishment in Quebec, use Form T2203, Calculation of Tax for 1996 - Multiple Jurisdictions, to calculate your abatement.

Line 448 - Canada Pension Plan overpayment

If you were not a resident of Quebec and you contributed more than you had to, as explained at line 308, enter the difference on line 448. We will refund the excess contributions to you, or use them to reduce your balance owing. However, if you were a resident of Quebec, this line does not apply to you. Claim the excess amount on your Quebec provincial return.

Line 450 - Employment Insurance overpayment

If you contributed more than you had to, as explained at line 312, enter the difference on line 450. We will refund the excess premiums to you or use them to reduce your balance owing.

Note
If you had to repay some of the Employment Insurance benefits you received, do not claim the repayment on this line. See line 232 for details on how to claim a deduction for the benefits you repaid.

Line 454 - Refund of investment tax credit

If you are eligible for an investment tax credit (line 412), based on expenditures made in 1996, you may be able to claim a refund of your unused investment tax credit.

Calculate the refundable part of your investment tax credit on Form T2038(IND.), Investment Tax Credit (Individuals) 1995 and Subsequent Years. Attach a completed copy of the form to your return.

The refund you claim reduces the amount of credit available to you for other years.

Line 456 - Part XII.2 trust tax credit

Enter the amount shown in box 38 of your T3 slip.

Line 457 - Employee and partner GST rebate

If you deducted expenses from your income as an employee (lines 212 or 229) or as a partner (lines 135 to 143), you may be eligible for a rebate of the GST you paid on those expenses.

Generally, you can claim a rebate of the GST you paid if:

To claim this rebate, get the publication called Guide and Form for Employee and Partner GST Rebate. The guide lists the expenses that qualify. It also includes a copy of Form GST 370, Employee and Partner GST Rebate, which you need to make your claim. Attach a completed copy of this form to your return, and enter on line 457 the rebate you are claiming.

Note
Generally, you have to include in income any rebate you receive, on the return for the year in which you receive it. For example, you may claim a rebate on your 1996 return. If we allow your claim, and assess that return in 1997, you have to report the rebate on your 1997 return. You may have received a GST rebate in 1996. If you did and you are an employee, see line 104. If you are a partner, get the income tax guide called Business and Professional Income.

Line 476 - Tax paid by instalments

Enter the total instalment payments you made for your 1996 taxes. We will be able to process your return faster if you correctly enter the instalment payments you made for 1996.

In February 1997, we will issue you either Form INNS1, Instalment Reminder, or Form INNS2, Instalment Payment Summary, that shows your total 1996 instalment payments that we have on record. If you made an instalment payment for your 1996 taxes that does not appear on this reminder or summary, also include that amount on line 476.

Line 478 - Forward-averaging tax credit

If you are withdrawing some of your forward-averaging amount on line 237, enter on line 478 the total forward-averaging tax credit from Form T581, Forward Averaging Tax Credit. See line 237 for details.

Line 479 - Provincial or territorial tax credits

If you were not a resident of Quebec or Saskatchewan, see Form T1C, which is included in the forms booklet, for details on these credits.

If you were a resident of Quebec or Saskatchewan, this line does not apply to you. Residents of Quebec claim their provincial tax credits on their provincial returns. Residents of Saskatchewan use their provincial tax credits to reduce their provincial taxes payable on line 428.

Lines 484 and 485 - Refund or Balance owing

Your refund or balance owing is the difference between your total payable (line 435) and your total credits (line 482).

If your total payable (line 435) is less than your total credits (line 482), enter the difference on line 484. This amount is your refund.

If your total payable (line 435) is more than your total credits (line 482), enter the difference on line 485. This amount is your balance owing.

If the difference is less than $2, you do not have to make a payment and you will not receive a refund.

Line 484 - Refund

If you are expecting a refund for 1996, but our records show that you owe an amount, or are about to owe an amount for another year, we may keep some or all of your refund and apply it against the amount you owe.

We may also have to apply your income tax refund against certain outstanding government debts. The most common types of government debts are Canada Student Loans, Employment Insurance benefit overpayments, Immigration loans, and training allowance overpayments. We may also apply your refund to satisfy a garnishment order under the Family Orders and Agreements Enforcement Assistance Act.

Direct deposit


Direct deposit

You can have your income tax refund, GST credit, and your Child Tax Benefit payments deposited directly into your account at a financial institution.

To start direct deposit, or to change information you already gave us, complete the Direct Deposit Request on page 4 of your return. You do not have to complete this area if you already have direct deposit service and the information you already gave us hasn't changed. Your direct deposit request will stay in effect until you change the information or cancel the service.

If you are changing the account into which we deposit a payment, do not close the old account before we deposit the payment into the new account. If your financial institution advises us that you have a new account, we may deposit your payments into the new account. If we cannot deposit a payment into your account, we will mail a cheque to you at the address we have on file.

If you want your Child Tax Benefit payments deposited into a different account, you will have to send us a completed Form T1-DD(1), Direct Deposit Request - Individuals. You can get this form from us. You can send it in with your return or separately.

If you need help to complete the information on page 4, or to cancel direct deposit service for one or more of these payments, contact us.

Line 485 - Balance owing

Attach to the front of your return a cheque or money order made out to the Receiver General. Do not mail cash. To help us credit your payment properly, please write your social insurance number on the back of your cheque or money order. Enter the amount of your payment on line 486.

Making a payment arrangement - If you cannot pay your balance owing on or before April 30, 1997, you can make a mutually acceptable payment arrangement by contacting your tax services office. We will still charge daily compound interest on any outstanding balance after April 30, 1997, until you pay it in full.

Tax Tip
Even if you cannot pay all of your balance owing right away, you should still file your return on time. Then you will not have to pay a penalty for filing your return after the due date. See page 6 for details.

Schedule 1, Federal Tax Calculation (lines 500 to 518)

There are two methods on Schedule 1 (Method A or Method B) that you can use to calculate your federal tax. If you have a straightforward tax situation, use Method A, and follow the instructions on Schedule 1. If you have to use Method B, the information that follows will help you complete Schedule 1.

If you have to pay minimum tax, or if you are claiming an overseas employment tax credit, see either Form T691, Calculation of Minimum Tax, or Form T626, Overseas Employment Tax Credit Calculation, whichever applies, before completing the schedule.

Line 500 - Tax adjustments

You may be allowed a tax adjustment if you:

If either of these situations applies to you, we will use this line to record any tax adjustment you are allowed.

Line 502 - Federal dividend tax credit

If you reported dividends on line 120, enter the dividend tax credit on line 502. This amount is the total of the dividend tax credits from taxable Canadian corporations shown on the dividend information slips. If you didn't receive dividend information slips, the dividend tax credit is 13.33% of the taxable amount of dividends from taxable Canadian corporations (see line 120).

Note
Foreign dividends do not qualify for this credit.

Line 504 - Minimum tax carry-over

If you paid minimum tax for any years from 1989 to 1995, but you do not have to pay minimum tax for 1996, you may be able to claim a credit against your 1996 taxes for all or part of the minimum tax you paid in those years. To calculate your claim, complete Parts I, II, and VIII of Form T691, Calculation of Minimum Tax. Attach to your return a completed copy of the form.

Line 506 - Basic federal tax

Your basic federal tax is a subtotal you use for certain calculations. For example, the federal individual surtax is generally a percentage of your basic federal tax.

Overseas employment tax credit - To make your claim, use Form T626, Overseas Employment Tax Credit Calculation. Enter the result of the calculation on line 506. For details, get Interpretation Bulletin IT-497, Overseas Employment Tax Credit, and Form T626.

Lines 507 and 508 - Federal foreign tax credit

This credit is for foreign income or profits taxes you paid on income you received from outside Canada and reported on your Canadian tax return. Certain tax treaties with other countries may affect whether you are eligible for this credit.

Note
You may have deducted an amount on line 256 for income that is not taxable in Canada under a tax treaty (such as U.S. social security benefits). In that case, do not include that income, or any tax withheld on that income, in your foreign tax credit calculation.

If the total tax you paid to all foreign countries is more than $200, you have to do a separate calculation for each country for which you claim a foreign tax credit.

You also have to do a separate calculation for business income taxes and non-business income taxes paid to each foreign country. You can carry unclaimed foreign business income taxes back three years and forward seven years.

In most cases, the foreign tax credit you can claim for each foreign country is the lower of the following two amounts:

Note
If you paid tax on income from foreign property (other than real property), your foreign tax credit cannot be more than 15% of your net income from that property. However, you can deduct on line 232 the part of the foreign taxes you paid over 15%.

For details on how to calculate your claim, get Interpretation Bulletin IT-270, Foreign Tax Credit.

How to claim

Tax Tip
Your federal foreign tax credit on non-business income may be less than the tax you paid to a foreign country. If so, and you were not a resident of Quebec, you may be able to claim a provincial or territorial foreign tax credit. Get Form T2036, Calculation of Provincial Foreign Tax Credit, to help you calculate the credit. Attach a completed copy of the form to your return. Also, you may be able to claim a deduction on line 232. You can claim the amount of net foreign taxes you paid for which you have not received a federal, provincial, or territorial foreign tax credit. This does not include certain taxes you paid, such as those on amounts you could have deducted under a tax treaty on line 256. For details, get Interpretation Bulletin IT-506, Foreign Income Taxes as a Deduction From Income.

Federal logging tax credit

If you paid logging tax to a province for logging operations you performed in the province, you may be able to claim a logging tax credit. For details on how to calculate your credit, contact us.

Since there is no line on the return to claim your tax credit, write in "federal logging tax credit" and your allowable credit below line 30 in Method B on Schedule 1. Subtract your allowable credit from the amount on line 30, and enter the result on line 406 of your return (if negative, enter "0").

Line 511 - Additional federal foreign tax credit

If you claimed a foreign tax credit, you may be able to claim an additional federal foreign tax credit. Use Part II of Form T2209, Calculation of Federal Foreign Tax Credits, to calculate this credit.

Line 518 - Additional investment tax credit

You may also be able to reduce your individual surtax by part of the unused investment tax credit you earned for 1996. See Form T2038(IND.), Investment Tax Credit (Individuals) 1995 and Subsequent Years, for details.

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