A Guaranteed Investment Certificate (GIC) is a Canadian deposit instrument that pays a fixed interest rate over a specified term. At maturity, the investor receives the original principal plus accumulated interest. GICs are issued by banks, trust companies, and credit unions, and are protected by the Canada Deposit Insurance Corporation (CDIC) up to $100,000 per depositor per insured category for member institutions.
Quick Answer
A $10,000 GIC at 4.50% per year for a 1-year term returns $10,450 at maturity. For a 5-year GIC at 4.25% compounded annually, the maturity value is $10,000 x (1.0425)^5 = $12,303. Most Canadian GICs compound interest annually, though some compound semi-annually, monthly, or pay simple interest.
How GIC Interest Is Calculated
Compound interest GIC: Maturity value = Principal x (1 + rate/n)^(n x years), where n = compounding frequency per year.
Simple interest GIC: Maturity value = Principal x (1 + rate x years). Simple interest GICs are common for terms of 1 year or less.
Example — compound annual: $25,000 at 4.50% for 3 years = $25,000 x (1.045)^3 = $27,909.
Example — simple interest: $25,000 at 4.50% for 90 days = $25,000 x (4.50% x 90/365) = $277.40 interest, maturity value $25,277.40.
GIC Interest Rate Comparison (Early 2025)
| GIC Type |
Typical Rate Range (Early 2025) |
CDIC Eligible |
| 1-year non-redeemable |
3.75%–4.75% |
Yes (CDIC members) |
| 2-year non-redeemable |
3.50%–4.50% |
Yes |
| 3-year non-redeemable |
3.50%–4.35% |
Yes |
| 5-year non-redeemable |
3.40%–4.25% |
Yes |
| Cashable (30-day lock) |
3.00%–3.75% |
Yes |
| Market-linked GIC |
0%–varies (equity-linked) |
Principal only |
Note: Rates change frequently. Compare rates at your bank, credit union, and online brokers before purchasing.
GIC Interest and Tax
GIC interest is fully taxable as investment income in Canada, regardless of whether it is paid out or left to compound. For GICs with a term of more than one year where interest is not paid annually, you must still report accrued interest each year on your T1 return — CRA requires annual accrual reporting. Your financial institution issues a T5 slip for the interest earned in each calendar year.
GICs held inside a TFSA, RRSP, RRIF, or RESP are sheltered from this annual accrual requirement — growth is tax-deferred or tax-free depending on the account type.
CDIC Deposit Insurance
CDIC insures eligible deposits (including GICs with terms of 5 years or less) at member institutions up to $100,000 per depositor per insured category. Categories include: deposits in your own name, joint deposits, RRSP deposits, TFSA deposits, RRIF deposits, RESP deposits, and RDSP deposits. Each category is insured separately — a depositor with $100,000 in personal GICs and $100,000 in a TFSA GIC at the same CDIC member has $200,000 insured.
Credit union deposits are protected by provincial deposit guarantee corporations (DICO in Ontario, DGCM in Quebec, etc.) — typically with higher or unlimited coverage limits.
Verified Against Source
GIC interest taxation rules are set under section 12(4) of the Income Tax Act (annual accrual for multi-year GICs). CDIC coverage rules are set under the Canada Deposit Insurance Corporation Act. Source: cdic.ca/your-coverage/how-deposit-insurance-works and canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/financial-slips-summaries/return-investment-income-t5.html
Frequently asked questions
- How is GIC interest calculated?
- For a compound interest GIC, maturity value = Principal x (1 + rate/n)^(n x years), where n is the compounding frequency (annually = 1, semi-annually = 2, monthly = 12). For a simple interest GIC (common for terms under 1 year), maturity value = Principal x (1 + rate x days/365). Most Canadian bank GICs compound annually.
Are GICs taxable in Canada?
Yes. GIC interest is fully taxable as investment income in the year it is earned, even if it is not paid out. For GICs with terms over one year, CRA requires annual accrual — you report and pay tax on interest as it accrues each year, not just at maturity. Your institution issues a T5 slip. GICs inside a TFSA, RRSP, RRIF, or RESP are sheltered from annual tax.
What is the CDIC insurance limit for GICs?
CDIC insures eligible deposits (including GICs with terms of 5 years or less) up to $100,000 per depositor per insured category at member institutions. Categories include personal deposits, joint deposits, RRSP, TFSA, RRIF, RESP, and RDSP deposits — each insured separately. Credit unions use provincial deposit guarantee programs with similar or higher limits.
What is the difference between a cashable and non-redeemable GIC?
A non-redeemable GIC locks in your money for the full term with no early withdrawal. A cashable GIC allows early redemption, typically after a 30- to 90-day lock-in period, at a reduced rate. Cashable GICs pay lower interest rates (typically 0.5-1.0% less) than non-redeemable GICs of the same term in exchange for flexibility.
Can I put a GIC inside a TFSA or RRSP?
Yes. GICs are qualified investments for TFSAs, RRSPs, RRIFs, FHSAs, and RESPs. Holding a GIC inside a TFSA means interest compounds tax-free. Inside an RRSP or RRIF, interest accumulates tax-deferred. You claim the contribution deduction on the RRSP contribution, not on the GIC interest itself.
How do GIC rates compare to savings accounts?
GIC rates are generally higher than high-interest savings account rates for terms of 1 year or longer, in exchange for locking in your money. As of early 2025, 1-year GIC rates at competitive institutions range from 3.75% to 4.75%, while most HISA rates are 3.0%-4.0%. The trade-off is liquidity — savings accounts can be accessed anytime.
What is a market-linked GIC?
A market-linked or equity-linked GIC guarantees the return of principal at maturity but links the interest earned to a stock market index (such as the TSX or S&P 500). If the index rises, you receive partial participation in the gain (typically 50-80% of the return). If it falls, you get your principal back but earn nothing. CDIC insures the principal only — not the potential market return.
Do I have to report GIC interest if it has not been paid out?
Yes. Under ITA section 12(4), for GICs with terms over one year, you must report and pay tax on accrued interest each year — even if the institution does not pay it out until maturity. Your T5 slip will show the accrued amount each year. This is one reason why GICs inside registered accounts (TFSA, RRSP) are more tax-efficient for long-term GICs.
What happens to my GIC if my bank fails?
CDIC insurance covers eligible deposits (including GICs with terms of 5 years or less) up to $100,000 per insured category at member institutions. If a CDIC member fails, CDIC pays out insured deposits. GICs with terms over 5 years are not CDIC-eligible. Credit union deposits are covered by provincial guarantee programs with comparable or higher limits.
What is the best GIC term in Canada right now?
The optimal term depends on your rate expectations and liquidity needs. In an inverted or flat rate environment (as in early 2025, where 1-year rates exceed 5-year rates), shorter terms may be preferable to avoid locking in lower long-term rates. A GIC ladder strategy — spreading deposits across 1, 2, 3, 4, and 5-year terms — provides both exposure to higher short-term rates and principal rolling over regularly.
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