Indian employees

The CRA recognizes that many First Nations people in Canada prefer not to describe themselves as Indians. However, the CRA uses the term "Indian" because it has a legal meaning in the Indian Act.

On this page

The following information will help you determine which deductions you have to make for Indians.



An Indian is a person who is registered or entitled to be registered as an Indian under the Indian Act.


The term “reserve” is defined under the Indian Act and, for the purpose of this webpage, includes all settlements given reserve-like treatment for taxation purposes under the Indian Settlements Remission Order. It also includes any other areas that are treated similarly under federal laws such as Category I-A lands under the Cree-Naskapi (of Quebec) Act.

Indian living on a reserve

This means an Indian who lives on a reserve in a domestic establishment that is their principal place of residence and that is the centre of their daily routine.

Employer resident on a reserve

When an employer is resident on a reserve, the reserve is the place where the central management and control over the employer organization is actually located.


We usually consider a group that performs the function of board of directors of an organization as exercising the central management and control of an organization. However, it may be that some other person or group manages and controls the organization. Generally, a person or group manages and controls an organization at the principal place of business. However, this activity can occur in a place other than the principal administrative office of the organization. It is a question of fact as to where the central management and control is exercised.


Following the Supreme Court of Canada decision in the Glenn Williams v Canada case, we developed guidelines to help you determine a tax exemption that applies to an Indian’s employment income. These guidelines do not reflect a change in tax policy. They deal only with determining a tax exemption under the Indian Act following the Supreme Court decision. As a result of the Williams decision, you have to examine all factors connecting income to a reserve to determine if income was earned on a reserve and is tax exempt.

When you apply all the connecting factors, be aware of unusual or exceptional circumstances such as these:

If you have any questions about a particular situation, call 1-800-959-5525.

Form TD1 IN, Determination of Exemption of an Indian’s Employment Income, will help you decide what type of exemption might apply to an Indian’s employment income according to the Indian Act Exemption for Employment Income Guidelines. Keep a completed form on file for each employee in case we ask to review it.

Taxable salary or wages paid to Indians

CPP contributions, EI premiums, and income tax

If you are an employer paying taxable salary or wages to an Indian, you have to deduct CPP contributions, EI  premiums, and income tax.


If you paid a retiring allowance to an Indian, see Retiring allowances.

Non-taxable salary or wages paid to Indians

Canada Pension Plan

The employment of an Indian whose income is exempt from tax is excluded from pensionable employment. Therefore, if you are an employer paying non-taxable salary or wages to an Indian, you do not have to deduct CPP contributions.

Application for coverage under CPP

Although you do not have to deduct CPP from non-taxable income you pay to an Indian, you can choose to provide your Indian employees with optional CPP coverage. You can elect to do this by completing and filing Form CPT124, Application to Cover the Employment of an Indian in Canada Under the Canada Pension Plan Whose Income is Exempt Under the Income Tax Act. However, you cannot revoke this election and you have to cover all employees.

Coverage under the CPP starts on either the date you sign the application or on a later date that you specify. It cannot be retroactive to a date before the date you signed the application.

For more information about coverage under CPP, go to Indian workers and the Canada Pension Plan.

Employment insurance

You have to deduct EI premiums from the non-taxable salary or wages you pay to an Indian.


EI benefits, retiring allowances, CPP payments, registered pension plan benefits, or wage-loss replacement plan benefits will usually be exempt from income tax when they are received as a result of employment income that was exempt from tax. If a part of the employment income was exempt, then a similar part of these amounts will be exempt.

For more information about the Indian Act Exemption for Employment Income Guidelines and the different registration dates, go to Information on the tax exemption under section 87 of the Indian Act.


See the reporting instructions for information on how to complete the T4 Statement of Remuneration Paid (slip) for Indians.

Forms and publications

Related topics

Page details

Date modified: