Indigenous peoples is a collective name for the original peoples of North America and their descendants. Often, Aboriginal peoples is also used.

The Canadian Constitution recognizes three groups of Aboriginal peoples: Indians (more commonly referred to as First Nations), Inuit, and Métis. These are three distinct peoples with unique histories, languages, cultural practices, and spiritual beliefs.

First Nations people include Status and non-Status Indians.

A reserve, as defined by the Indian Act, means a tract of land, the legal title to which is held by the Crown, set apart for the use and benefit of an Indian band.

An Indian band is defined as a body of Indians for whose collective use and benefit lands have been set apart or money is held by the Crown, or who have been declared to be a band for the purpose of the Indian Act.

If a Status Indian's personal property including income is earned or situated on a reserve then it is exempt from tax under section 87 of the Indian Act. This may include employment income earned by a Status Indian who does not live on a reserve, but who performs their duties of employment on a reserve.

If help is needed to find out if a tract of land is considered to be a reserve, for purposes of this exemption, advise individuals to contact their Band or CIRNAC.

Property or income not situated on a reserve will generally be subject to tax.

In all cases, this tax exemption would only apply to those who are Status Indians.

For more information, please consult the CRA website and go to the section tax exemption.

What to consider when filing an income tax return for Indigenous peoples

Employment-related income

Employment Insurance benefits, Canada Pension Plan benefits, Quebec Pension Plan benefits, registered pension plan benefits, retiring allowances, and wage-loss replacement plan benefits received by a Status Indian are treated in the same way as the employment income that gave rise to the particular income. In other words, if the employment income is exempt from income tax under section 87 of the Indian Act, the employment-related income will also be exempt. If part of the employment income is exempt, any employment-related income arising from that exempt income will also be exempt from income tax.

Exempt income

Certain amounts cannot be claimed as deductions if they are directly related to tax-exempt income. However, if the income is only partially exempt, the deduction will be granted in the same proportion. For example, a Status Indian who pays union dues and whose income is only 60% exempt, would only be able to claim 40% of the union dues as a deduction to offset the taxable portion of employment income. Some other examples of deductions might include:

• Registered Pension Plan (RPP) contributions
• Employment expenses

Tax-exempt income is not taken into consideration in the calculation of many deductions, tax credits, and benefits, including:

• Canada child benefit (CCB)
• GST/HST credit
• RRSP deduction limits
• charitable donations
• medical expenses

Form T90 Income exempt under the Indian Act

Individuals who are registered or entitled to be registered as an Indian under the Indian Act and have income that is exempt from tax under the Indian Act can use the form T90 to calculate their net exempt income so that the CRA can properly calculate their Canada training credit limit (CTCL) for the following year, if applicable, and the Canada workers benefit (CWB) for the current tax year.

For example, if an individual’s tax-exempt income qualifies them for the CWB, that same exempt income would not affect the calculation of their Canada child benefit (CCB) or their GST/HST credit.

Exempt income and deductions that are not identified as such on the tax slips can be reported under the Status Indian exemptions section of UFile.

Once the tax-exempt amounts are entered in their appropriate fields, the tax-exempt income will be reported on form T90, in the Tax Return tab.

Tax slips that indicate exempt income

The slips in the following table indicate the amounts which are exempt from taxation under section 87 of the Indian Act. Use the table as a reference guide when dealing with tax-exempt income.

Example of a T4 information slip for a Status Indian who has earned an income of $35,000 on a reserve.

The tax-exempt salary or wages paid in the year are reported in box 71.

Only a taxable salary or wages paid is reported in box 14, Employment income. In this case, all of the income was tax-exempt; therefore, box 14 is blank.

Tax-exempt salary or wages paid to a Status Indian are insurable earnings and the employer must deduct Employment Insurance (EI) premiums. An amount will be entered in box 18, indicating the employee’s EI premiums that were deducted and box 24, indicating the EI insurable earnings.

CPP or QPP contributions are normally not paid on tax-exempt salary under the Indian Act since it is normally not included in pensionable employment. However, an employer can elect to pay CPP or QPP contributions on behalf of all of their employees who earn tax exempt employment income. In this case, the Status Indian employee will have CPP contributions deducted from their employment income and the amount will be recorded in box 16.

Example of a T4E, Statement of Employment Insurance and Other Benefits, where an individual has received employment insurance or other benefits.

Total benefits paid that are received in the year are reported in box 14, Total benefits paid. Box 14 includes any amounts shown in boxes 15, 17, 18, 33, and 36. Non-taxable benefits paid to a Status Indian are reported in box 18, Tax-exempt benefits, this includes benefit amounts that are fully or partially tax-exempt.

In this example, the recipient has status. Their non-taxable benefits received, in the amount of $3,875.00, are indicated in box 18.

Tax slips that do not indicate exemptions

These slips do not indicate if the stated income is fully or partially exempt from tax, or if it is to be included or excluded from an individual’s return.

Tax information slips that do not indicate tax-exempt income

Social assistance payments

Social assistance payments paid by a municipal, provincial, or territorial government must be reported. They will have a T5007 slip issued, regardless of an individual's status.

Social assistance payments paid by a band council to their status members living on reserve are tax exempt. An information slip or a letter from the band council may be issued for these types of payments. The income is reported under the social assistance payments in UFile, as well as in the Status Indian exemptions section of UFile.

Northern residents deductions

Individuals living in northern Canada, and in other remote Canadian locations, may be entitled to claim the northern residents deductions.

For more information, view the Northern residents section in this training or visit the Northern residents web page on Canada.ca.

Residency information for tax administration agreements

For individuals living in British Columbia, Newfoundland and Labrador, the Northwest Territories, or the Yukon, it is recommended to complete the Residency information for tax administration agreements section. Although this question is not mandatory, answering it correctly ensures that money that should go to specific Indigenous groups is calculated correctly. If the individual is unsure if they reside on the specific lands, have them contact their local Band or you may contact the CVITP dedicated help line at 1-866-398-3488.

All individuals who reside on Settlement Lands, or within a designated community identified in the table below, should select from the drop-down menu the community in which the individual resides for the question Select where you were living on December 31. However, all citizens, including those who identify themselves as a community member, who do not reside on Settlement Lands, or within a designated community identified in the table, should select Not residing on Xxxx land/community.

Slips included:

• T4 – Statement of Remuneration Paid (on-reserve – Situation 1)
• T4 – Statement of Remuneration Paid (off-reserve – Situation 2)

Situation 1: Income situated on-reserve

Christie is an Indian under the Indian Act. Christie lives off the reserve but works on the reserve. Her income is tax-exempt and she wants to file an income tax and benefit return. She is eligible for the Canada workers benefit (CWB).

Slip required:

• T4 – Statement of Remuneration Paid (on-reserve)

Points to remember:

• Since Christie is an Indian under the Indian Act, it is necessary to select the Tax return for a Status Indian box under the Interview setup in UFile
  • Confirm her status by answering Yes to the statement Please confirm that you are a registered Indian, or entitled to be registered as an Indian under the Indian Act on the Status Indian exemptions page
• Although Christie lives off-reserve, , because she works on the reserve, her employment income is considered to be tax-exempt. Exempt employment income for a Status Indian is shown in box 71 of the T4 slip. Exempt income is not included in box 14 of the T4 slip
  • To enter the T4 slip, click T4 and employment income in the left side menu and choose T4 income (earned in any province except Quebec)
  • Box 71 – Indian (exempt income) – Employment can be found in the drop-down menu under Other information

Situation 2: Taxable income earned off-reserve

Christie is an Indian under the Indian Act. She does not live or work on a reserve. She is eligible for the Canada workers benefit (CWB).

Slip required:

• T4 – Statement of Remuneration Paid (off-reserve)

Points to remember:

• Although Christie is a Status Indian, her employment income is taxable because she lives and works off-reserve
  • Note: in this case her employment income is subject to the same tax rules as other Canadian residents, and therefore the taxable income is found in box 14 instead of box 71 of the T4 slip.

If the individual believes that the income should be exempt, they are responsible for having their employer correct the information

Information slips for Christie:

T4 – Statement of Remuneration Paid (on-reserve – Renewal Ltd.)

T4 – Statement of Remuneration Paid (off-reserve – Renewal Ltd.)

Situation 1: Income situated on-reserve

Situation 2: Taxable income earned off-reserve

Slips required:

• T4A(P) – Statement of Canada Pension Plan Benefits
• T4A (OAS) – Statement of Old Age Security

Rosa lives on a reserve, which she has done for most of her adult life. She received $6,000 in OAS payments and $12,500 in CPP; but $10,000 of her CPP income is tax-exempt. Rosa also received $5,000 in social assistance from the Band. She has a letter from the Band outlining the social assistance payments.

Points to remember:

• Check the Tax return for a Status Indian box under the Interview setup in UFile
  • Click Status Indian in the left side menu, and on the Income Exempt from Tax under the Indian Act page, enter $10,000 in the field for Exempt CPP/QPP benefits and $5,000 in the field for Exempt social assistance payments
  • To enter the information regarding the social assistance, check the box next to Social assistance, worker’s compensation (T5007/RL-5) in the Interview setup. Then click Social assistance, worker’s compensation in the left side menu and click the + sign next to T5007-Worker’s compensation benefits, social assistance, etc. (federal lines 14400, 14500, 14600). Enter the amount received in box 11.
  • To enter the T4A(P) slip, click T4A and pension income in the left side menu and choose T4A(P) – Statement of Canada pension plan benefits
  • To enter the T4A(OAS) slip, click T4A and pension income in the left side menu and choose T4A (OAS) – Old age security pension income

Information slips for Rosa:

T4A(P) – Statement of Canada Pension Plan Benefits

T4A (OAS) – Statement of Old Age Security

Slips included:

• T4 – Statement of Remuneration Paid (Eagle Lake)
• T4E – Statement of Employment Insurance and Other Benefits

Mikom works on a reserve and has received Employment Insurance for a portion of the year he was not working. His income is tax-exempt.

Slips required:

• T4 – Statement of Remuneration Paid (Eagle Lake)
• T4E – Statement of Employment Insurance and Other Benefits

Points to remember:

• Exempt employment income for a Status Indian is shown in box 71 of the T4 slip. Exempt income is not included in box 14 of the T4 slip
  
  • To enter the T4 slip, click T4 and employment income in the left side menu and choose T4 income (earned in any province except Quebec)
  • Since Mikom’s employment income is tax-exempt and his employer has not elected to pay CPP contributions, Mikom is also exempt from contributing into the CPP. His employer does not deduct CPP at the source. This is indicated by the check in box 28 of his T4 slip
  • For box 28, select Exempt CPP/QPP (rare!) from the drop-down menu
  • Box 71 – Indian (exempt income) – Employment can be found in the drop-down menu under Other information
• To enter the T4E slip, click T4 and employment income in the left side menu and choose T4E – Employment insurance and other benefits
  
  • Enter $1,500 in box 18, Tax-exempt benefits, and $1,500 in box 14, Total benefits paid

Information slips for Mikom:

T4 – Statement of Remuneration Paid (Eagle Lake)

T4E – Statement of Employment Insurance and Other Benefits