Can CRA tax my TFSA gains as business income if I trade too actively inside the account?

Yes. TFSA growth and withdrawals are normally not taxable, but CRA can and does treat frequent, active trading inside a TFSA as carrying on a business, and when that happens, the trading gains lose their tax-free character and become taxable, even though they happened inside an account that's supposed to be tax-free. This isn't a rare, theoretical risk; it's a real and increasingly scrutinized area of enforcement.

CRA looks at factors similar to those used generally to distinguish ordinary investing from carrying on a trading business: how frequent and high-volume the transactions are, how short the holding periods tend to be, the account holder's knowledge and experience in the markets, how much time is devoted to the activity, and whether the overall pattern looks more like running a business than passively holding investments. No single factor decides it on its own. If CRA successfully recharacterizes the activity, the resulting tax is generally assessed against the TFSA itself, meaning the tax-free status of that income can be lost even though everything happened inside a registered account. Given how real this risk is, anyone trading actively inside a TFSA should think carefully about how their trading pattern would look under this kind of scrutiny.