Elimination of Federal Tax on Scholarships

“The federal Budget 2006 announced the elimination of federal income tax on all
income from scholarships, bursaries, and fellowships. The federal legislation
was recently approved on February 21, 2007, to authorize the policy changes.
For 2006, the full amount of scholarships, fellowships, or bursaries are not
taxable and are no longer reported as income on your tax return. The
scholarships, fellowships, or bursaries must be received by you as a student with
respect to your enrolment in a program that entitles you to claim the Education
Amount (Form T2202, Education and Textbook Amounts Certificate). If you are
not eligible for the education amount, report on line 130 only the amount that is
more than $500.
T4A’s issued by Alberta Advanced Education – Students Finance will show the
tax amount of scholarships and bursaries in Box 28 – Other Income. Box 38,
shows the footnote code as 05, which is for Scholarships/Bursaries. This amount
should not be reported on your 2006 tax return, as long as you are eligible for
the Education Amount (Form T2202, Education and Textbook Amounts
Certificate).“
If you are unsure of your tax status, contact the Canada Revenue Agency at:
1-800-959-8281 or www.cra.gc.ca.