2021-0907701E5 Training allowance payments

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether the training allowance payments received by a trainee are to be included in the recipient’s taxable income under the Act.

Position: In this situation, yes. The training allowance payments will be included in a trainee’s income under paragraph 56(1)(n) to the extent the amount exceeds the scholarship exemption.

Reasons: The training allowance payments received by trainees are to defray living costs while learning occupational skills. Therefore, the primary purpose of a training allowance payment is to provide assistance to enable a trainee to pursue an education and would be included in a trainee’s income under paragraph 56(1)(n).

Author: Underhill, Cynthia
Section: ITA: Section 3; Paragraphes 56(1)(n), (r), (u).

XXXXXXXXXX                                                             2021-090770
                                                                                     C. Underhill

September 6, 2022


Re: Training allowance payments

We are writing in response to your correspondence dated August 30, 2021, in which you asked whether the training allowance (TA) payments received by a trainee from XXXXXXXXXX are to be included in a recipient’s taxable income under the Income Tax Act (Act). If yes, how to report such amounts.

It is our understanding that XXXXXXXXXX receives funding indirectly from the Government of Canada’s Opportunities Fund for Persons with Disabilities. XXXXXXXXXX uses these funds to provide a weekly training allowance for up to 10 weeks to eligible trainees. XXXXXXXXXX selects a trainee who has an autism spectrum diagnosis and provides training in a specific software program. XXXXXXXXXX makes the TA payments to the trainee. XXXXXXXXXX does not pay any additional amounts to the trainee as wages. XXXXXXXXXX asserts that the trainees are not employees of XXXXXXXXXX and while training, trainees are not on XXXXXXXXXX payroll because there is no employee-employer relationship.

You referred to pages 6 and 20 of Guide T4130, Employers’ Guide Taxable Benefits and Allowances that explains the tax consequences of certain employment-related training. Please note that the comments on pages 6 and 20 of Guide T4130, would only apply if there is an employee-employer relationship between XXXXXXXXXX and the trainee. You have confirmed that the trainee is not an employee of XXXXXXXXXX and that you do not pay wages to the trainee; therefore the comments expressed in Guide T4130 do not apply to your situation.

Our comments:

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Scholarships and bursaries are amounts paid or benefits given to students to enable them to pursue their education. The term bursary is not defined in the Act, however, its meaning is broad enough to encompass almost any form of financial assistance paid to enable a student to pursue their education. Under paragraph 56(1)(n) of the Act, scholarships, fellowships, bursaries and similar prizes received by a taxpayer are included in income in the year of receipt, to the extent that the amount received exceeds the recipient’s scholarship exemption for the year.

Paragraph 3.8 of Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance (the Scholarship Folio) states,

“. . . Scholarships and bursaries may apply to any field of study, including an academic discipline (such as the arts or sciences), a professional program (such as law or medicine), a trade (such as plumbing or carpentry) or skill (such as certified first aid and truck driver training courses). Normally, a student is not expected to do specific work for the payer in exchange for a scholarship or bursary.”

As explained in paragraph 3.85 of the Scholarship Folio,

“Where the primary purpose of a payment is to provide assistance to enable a taxpayer to pursue an education and may therefore fall within the meaning of the term bursary for income tax purposes, the assistance should generally be included in computing the taxpayer’s income pursuant to subparagraph 56(1)(n)(i) rather than 56(1)(u).”

Based on the information available, it appears that the TA payments received by trainees under your program are to defray living costs while learning occupational skills. Therefore, the primary purpose of a TA payment is to provide assistance to enable a trainee to pursue an education and would be included in a trainee’s income pursuant to paragraph 56(1)(n) of the Act, to the extent the amount exceeds the scholarship exemption.

Where a student receives an amount as a scholarship or bursary in the year, the first $500 of the amount is exempt from income. The total amount of scholarship income received may be eligible for a full scholarship exemption (and therefore, not subject to income tax), if the recipient is considered a qualifying student. Since the XXXXXXXXXX program is not taken at a designated educational institution, as described in paragraphs ¶1.9(a) or 1.9(b) of Income Tax Folio S1-F2-C1, Qualifying Student and the Education and Textbook Tax Credits, the trainee would be not be considered a qualifying student.


Under paragraph 200(2)(a) of the Income Tax Regulations, every payer of a scholarship or bursary must file a T4A Summary of Pension, Retirement Annuity, and Other Income, and a related T4A Statement of Pension, Annuity, and Other Income (T4A Slip), to report the amount. We note that there is no statutory requirement to withhold income taxes on the payment of a bursary described in paragraph 56(1)(n) of the Act.

We trust that these comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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