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Some financial products in Canada are similar to what’s available in India, like fixed deposits and GICs. Check out our list.
If you’re from India, you’re in for a world of new experiences in Canada. Some things are the same as back home, while others are different. For example, driving a car is very much the same, but you now have to drive on the right side of the road. The same applies to your finances as well. Many aspects of living are similar to those you’re accustomed to, but they have different names in Canada. For example, the Canadian equivalent of a fixed deposit (FD) is a guaranteed investment certificate (GIC). Let’s dive in and demystify other Canadian finance terms using the closest corresponding ones from India.
Below are eight common money and finance terms in India and their Canadian counterparts.
A guaranteed investment certificate (GIC) in Canada is like a fixed deposit (FD) in India. It offers a safe and secure way to park your money aside while earning interest. As with an FD, you deposit a certain amount of money—typically with a bank or credit union—and get a guaranteed annual interest rate. GICs and FDs are also taxed similarly. For Canadian residents, the interest income is added to your earnings and taxed at your marginal tax rate, unless the GIC is held in a tax-free savings account (TFSA). One key difference between the two is that while FDs always offer a fixed rate of return, the return on some GICs can change. These include market-linked GICs (which are linked to the performance of a stock market index such as the S&P/TSX 60) and variable-rate GICs (whose interest rates change with the issuer’s prime rate).
In Canada, a mortgage is a loan to buy a home, and the purchased property is used as the collateral. In India, this financial product is simply called a “home loan” and functions in much the same way. Mortgages in Canada are typically offered by banks, credit unions and other financial institutions, just as home loans are provided by banks and non-banking financial corporations (NBFCs) in India.
Although the basics of these products are the same, there are key differences. Mortgages in Canada are negotiated on shorter “terms,” typically five years, even though they are amortized over longer periods. In India, a home loan is not generally broken into shorter terms.
Secondly, in Canada, you can get a mortgage with a down payment of as little as 5% of the home’s purchase price. The minimum down payment depends on the price of the home, and mortgage default insurance will be required by your lender for any down payment below 20% because the loan is considered riskier. In India, you typically need a down payment of at least 20% to qualify for a home loan.
In both countries, borrowers can benefit from tax breaks. In Canada, first-time home buyers can open a first home savings account (FHSA), a registered account designed to help them save towards a down payment. The FHSA offers tax deductions on contributions (up to a lifetime limit of $40,000). The registered retirement savings plan (RRSP) is also a registered account. It also offers tax deductions on contributions and, paired with the Home Buyer’s Plan (HBP)—which lets you borrow from your RRSP—home buyers can withdraw their savings tax-free for a down payment. In India, home loan borrowers can get tax deductions under various sections of the Income Tax Act.
See Canada’s best five-year fixed mortgage rates and five-year variable mortgage rates. For more terms related to home buying and mortgages, read National Bank’s article “Mortgage-Related Terms & Definitions.”
The CRA is the federal agency in Canada that administers tax laws for the federal and provincial governments, except for the province of Quebec. So, it’s like the IT Dept in India. Both these government bodies administer tax, oversee tax collection, ensure compliance with tax laws, and administer tax benefits and incentives. Much like receiving a notice from the IT Dept in India, receiving a letter from the CRA in the mail can cause a wide range of emotions—from the joy of a tax refund to the agony of a denied tax benefit.
You know how in India, income tax is only levied by the central government and not by the state governments. So, you pay income tax at what’s usually referred to as your “slab rate,” determined by your annual income.
In Canada, the rate at which you’re taxed on your last dollar earned is your marginal tax rate. Both the federal government and the provincial/territorial governments have income tax rates for different tax brackets, and Canadians pay taxes to both. For example, if you earn $75,000 annually in Ontario, your marginal tax rate is 29.65%, as of the 2023 tax year. If you want to learn more about how taxes work in Canada, here’s a short video by National Bank: “How do tax rates work?”
If you took out a loan in India, you would want to know your EMI (equated monthly installment) amount—the fixed amount to pay each month during the term of your loan. In Canada, though, your fixed loan repayment amounts, and any additional payments you make, are simply called “loan payments.” In your loan contract, it might appear as a more specific term, like “car payment,” “credit card payment” or “mortgage payment.”
In Canada, as in India, you have a credit score. In India, it’s commonly called the “CIBIL score,” because of the Credit Information Bureau (India) Ltd. In both countries, your credit score is a number between 300 and 900, representing how credit-worthy you are, or how likely you are to make your loan and other credit payments on time. The higher your score, the better for you.
Your score in both countries is based on several factors, including your repayment history, your credit utilization ratio, the length of your credit history, the types of credit you have, and the number of “hard checks” on your credit report from lenders. Your credit score helps to determine which loans you may be approved for and what interest rates lenders may offer you. Although credit scores are important in both countries, in Canada, your score is crucial to your financial health, because of the credit-based nature of the economy.
As a newcomer to Canada, you won’t have a credit score at first, as credit scores aren’t transferable between countries. You can start building a credit history by getting a credit card and paying off the balance in full every month. And, for a healthy credit score, try to limit your credit use to 30% of the total credit available.
Once you start earning enough income in Canada to cover your needs, you may have money left each month to put towards longer-term financial goals, such as retirement. Many Canadians invest in the stock market, often through a type of asset that gives small amounts of exposure to several stocks, such as exchange-traded funds (ETFs) or mutual funds. These pooled investments offer greater diversification than buying individual stocks.
Canadian residents and citizens can access both the Canadian and U.S. stock markets. Therefore, you’ll often come across stock market indices such as the S&P 500 (U.S.) or the S&P/TSX 60 (Canada). If you’ve invested in India, you’re probably familiar with stock market indices like the S&P BSE Sensex or the NSE NIFTY 50. As a quick guide: the S&P 500 is like the S&P BSE 500—it represents the 500 largest companies by market capitalization on the stock exchange; and the S&P/TSX 60 is like the NSE NIFTY 50 because these only track 50 to 60 of the largest stocks by market capitalization. To find ETFs for your portfolio, use MoneySense’s ETF screener.
When you look closely at your pay stub (the same thing as your “salary slip” in India), you’ll see contributions towards the CPP. The CPP is a public pension plan designed to provide Canadians with retirement income. It also includes certain disability and survivor benefits.
CPP contributions are made by both the employee and the employer, and they are a percentage of the employee’s gross salary. (If you’re self-employed, you will pay both the employee and employer amounts for CPP.) The amount you receive in retirement will be based on how much you’ve contributed to CPP and for how long, in addition to other factors.
For newcomers from India, the easiest way to understand how the CPP works is to consider it analogous to the Employee Provident Fund (EPF). Like the CPP, EPF contributions are made by the employee and the employer. But, while the CPP is a defined benefit plan (DBP), EPF money earns interest at an announced annual rate—so it’s akin to a defined contribution plan (DCP). Another difference: CPP provides monthly income in retirement, and EPF money can be completely withdrawn in retirement. CPP contributions are compulsory for all working Canadians aged 18 to 70.
When you open a bank account in Canada, you have the options for two basic types of accounts—chequing and savings. The chequing account is for regular transactions such as bill payments and e-transfers. But, crucially, it does not pay any interest on the money you hold in the account. Savings accounts pay a small amount of interest, and high-interest savings accounts (HISAs) pay more. In India, one account, a “savings account,” serves as both a savings account and a chequing account.
Another thing you might find shocking: in Canada, banking costs money. Yes, your bank charges you a monthly fee based on the type of package you have and the features and perks it includes. So, bank shopping is a thing! Some banks provide promotional no-fee banking for newcomers to Canada—such as National Bank of Canada (NBC), which offers newcomers a bank account with no fixed monthly fee for up to three years. After that, fees are competitively priced—currently starting as low as $3.95 per month. Additionally, if you’re a student or aged 24 or younger, your monthly fees are also waived.
NBC has also developed an understanding of newcomers’ needs. Its newcomer offer includes a service allowing you to speak directly with a lawyer at no cost for information on the following areas: immigration, housing, employment, education, health and everyday life. NBC was named the “Best bank for newcomers to Canada” in 2023 by MoneySense.
Learn more Canadian financial terms in the MoneySense Glossary.
Moving to Canada can be both exciting and challenging. There’s a whole new world to discover and some new things to learn, which could take time and effort. But you’re not starting from zero. You have a wealth of knowledge and experience from back home in India. It helps to lean on that while you learn about money and finance in Canada. After all, just like you can drive on the right side of the road after some practice, you’ll understand the financial system in no time!
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.
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