CRA indicates that the scholarship exemption is to be calculated on a month-by-month basis

The scholarship exemption regarding Canadian university students under inter alia ss. 56(3)(a)(i) and 56(3.1)(b) draws a distinction between those students who are full-time (FT) (i.e., generally, spending not less than 10 hours per week on courses in a “qualifying educational program” (QEP)) and those who are part-time (PT) (i.e., not FT but with at least 12 hours per month on the courses in a “specified educational program” (SEP).) The scholarship exemption for an award received by a PT “qualifying student” is generally limited to the cost of materials related to the program, the fees paid to the “designated educational institution” (DEI) in respect of the program, and the basic scholarship exemption of $500 – whereas the full amount of the grant received by an FT qualifying student is eligible for the scholarship exemption under s. 56(3)(a) provided (in the words of CRA) “it is reasonable to conclude that the award is intended to support the individual’s enrolment in the program.”

How is the scholarship exemption to be computed if the status of the student changes from FT to PT for part of a year? For example, an FT student in a four-year undergraduate degree program changes to PT status in a single term by enrolling in a three-week study-abroad program during a particular month. CRA would likely consider the student to be a PT qualifying student in respect of the study-abroad program, so that if the individual were to receive a grant to cover the duration of the study-abroad program, the scholarship exemption would be calculated on the basis that the student was a PT qualifying student in the particular month, so that the scholarship exemption would be limited to the cost of materials related to the study-abroad program, any fees paid to the (Canadian) DEI in respect of that program, and the basic scholarship exemption.

On the other hand, if the student were to take other courses alongside the PT study-abroad program so as to be elevated to FT status for that month, the individual would likely be eligible for the full scholarship exemption.

Neal Armstrong. Summary of 15 August 2022 External T.I. 2022-0926781E5 under s. 56(3.1)(b).