While you can buy, sell, and hold stocks within a TFSA, day trading or overly frequent trading through a TFSA may be considered a business activity by the CRA and flagged for audit. As such, you may then have to pay income tax on your trading activity, defeating the purpose of a TFSA.
When determining whether a TFSA should be subject to tax, the CRA would examine several factors including the duration of the holdings, the frequency of your trades, the quantity of securities traded, the time spent on trading, and your intention to hold investments and resell them for a profit. If the CRA determines your trades are an active business, you may be subject to higher tax rates for business income and not benefit from certain measures of capital gains and losses. Further guidance about transactions in securities can be found in CRA’s interpretation bulletin IT-479R.
If you hold stocks in your TFSA and are concerned that your trading frequency could be considered taxable as a business, you should consult a tax expert or a securities lawyer.