T4 Code 71 — Indian Act (exempt income) – Employment

What Code 71 means

Code 71 reports employment income earned by a person registered, or entitled to be registered, under the Indian Act that is exempt from tax under §87. The exemption applies when the income is "situated on a reserve". The location of the employment duties is the major factor; the employer being resident on a reserve is on its own rarely enough, and neither is the employee living on a reserve.

The amount is NOT included in Box 14 and is NOT taxed. You report it on Form T90, Income Exempt from Tax under the Indian Act, which the CRA uses to compute benefit entitlements — it does not add the amount to your taxable income.

The courts settle this with a "connecting factors" test — a non-exhaustive weighing of everything tying the income to a reserve. On top of that the CRA publishes four administrative Guidelines covering the common cases: Guideline 1 (you work mostly on a reserve), Guideline 2 (you and your employer both live on a reserve), Guideline 3 (you work partly on a reserve and either you or your employer lives on one), Guideline 4 (non-commercial work for a band, tribal council or similar organisation resident on a reserve).

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