The interest gained on the contribution and all the grants are taxed in the hand of the beneficiary. Make sure that the amount reported in Box 42 includes the CESG and the interest earned on the contribution.
If The child decides not to pursue a post-secondary education:
- The government grants will be returned
- The contribution is returned back to the contributor tax-free
- the contributor pays taxes on the income growth (earned interest) portion + 20% special tax
I hope this was helpful
