SCHOLARSHIPS, BURSARIES, FELLOWSHIPS, OSAP GRANTS
For simplicity, scholarships, bursaries, and similar amounts can be referred to as “awards”. For tax purposes OSAP grants are treated as bursaries. A fellowship may also be considered an award, provided it is not paid in connection with employment or a business.
When a post-secondary institution pays an award in a given tax year, the amount will be reported in Box 105 of a T4A slip. T4A issuers report the payment of the award without determining whether it is fully exempt, partially exempt, or taxable.
Elementary and secondary school awards are not taxable, and no slip is issued.
Calculation of scholarship exemption for the tax year: | ||||
Scholarships, fellowships, and bursaries received by you in the tax year related to a part-time program for which you are a part-time qualifying student for 2024, 2025 or 2026. | _________ | 1 | ||
Fees paid to the educational institution and costs of program-related material for the part-time program for which you are a part-time qualifying student for 2024, 2025, or 2026. Do not include costs and fees paid that you claimed for a scholarship exemption in a previous year. | _________ | 2 | ||
Enter the amount from line 1 or line 2, whichever is less. | _________ | 3 | ||
Line 1 minus line 2 (if negative, enter "0") | _________ | 4 | ||
Basic scholarship exemption | $500.00 | 5 | ||
Enter the amount from line 4 or line 5, whichever is less. | ________ | 6 | ||
Add lines 3 and 6. This is your total scholarship exemption. | ________ | 7 | ||
Calculation of amounts to be included in income for the tax year: | ||||
Total of all scholarships, fellowships, and bursaries received by you in the tax year in connection with your part-time enrolment in an educational program. | ________ | 8 | ||
Enter your scholarship exemption for the tax year from line 7 above. | ________ | 9 | ||
Line 8 minus line 9. This is the amount of scholarship, fellowship, and bursary income that you must include at line 13010 of your return (if negative, enter "0"). | ________ | 10 |
What is a “full-time” program?
For purposes of the award exemption, a full-time program is one that must run for at least three consecutive weeks and must require instruction or work in the program of at least ten hours a week throughout its duration and not simply for a minimum three-week period.[1] The CRA and UFile rely on whether a number is in box 25 of a T2202. As long as a number 1 or higher is in box 25, the program is considered full-time.
Because the award is fully exempt, it will not be included in income. As a result, Line 13010 of the tax return will be empty.
What if the student has an award but no T2202?
This situation can occur if the scholarship is paid in a different tax year than the tuition (for example, a T4A and T2202 are issued in separate years).
In UFile, if a T4A is entered without a T2202—and specifically without a Box 25 value—UFile will assume that any award amount above $500 is taxable. This is wrong. A workaround solution is to enter a T2202 with $0 tuition and ‘1’ in box 25. This workaround should only be used if the student was enrolled full-time in a qualifying program but the T2202 was issued in a different year.
Fellowships:
Fellowships are most often awarded to graduate students engaged in post-doctoral studies or research. Post-doctoral fellows are generally not considered students for the scholarship exemption, and their fellowship income is usually taxable unless it meets the narrow definition of an award in support of full-time study.
OSAP Grants:
For tax purposes, OSAP grants are treated as bursaries.
Scholarships may be exempt under a treaty:
If a Canadian tax resident received a scholarship from a foreign jurisdiction, the scholarship may be exempt from tax under a tax treaty.
For example, Article XX of the U.S. Canada tax treaty provides as follows:
“Payments received by an individual who is a student … and is, or was immediately before visiting a Contracting State, a resident of the other Contracting State, and who is present in the first-mentioned State for the purpose of the individual’s full-time education or full-time training, shall not be taxed in that State, provided that such payments arise outside that State, and are for the purpose of the maintenance, education or training of the individual.”
Therefore if an international student from the U.S., studying in Canada, received a scholarship from some payer located outside Canada, the scholarship is tax-exempt.
T4A Box 196 - tuition assistance for adult basic education:
T4A box 196 reports an amount paid by an organization for the fees of an adult basic education course. The amount might have been paid directly to the educational institution or else reimbursed to the person. The CRA requires that if Box 196 is used, the same amount must also be reported in Box 105. The amount is not taxable.
More information about this category of income is available in another document.
References:
[1] Section 56(1)(n) states that an award exemption is calculated under s.56(3). Section 56(3) states that an amount is exempt for a “qualifying student” as defined in s.118.6(1). Under s.118.6(1), a qualifying student is full time if enrolled in a qualifying educational program (QEP) at a designated educational institution. A QEP is defined as a program that runs for at least three consecutive weeks and must require instruction or work in the program of at least ten hours a week throughout its duration and not simply for a minimum three-week period. The terms are discussed in Income Tax Folio S1-F2-C1. See also Tax Interpretation letter 2022-0926781E5. Note that s.118.6(1) and Folio S-F2-C2 address the ‘Education and Textbook Tax Credits’. Those credits were eliminated in 2017. However, s.118.6(1) and the folio are still relevant because the Income Tax Act sections dealing with the award exemption draw on the definitions in s.118.6(1).