Deduction for an Indian
January 15, 2026
Income earned by an Indian, as defined under the Indian Act, may be exempt from federal income tax if it is considered to be situated on a reserve. Under federal rules (CRA), the exemption applies when there is a “sufficient connection” between the income and a reserve — for example, employment duties performed on a reserve or business activities primarily carried out on a reserve.
For Quebec tax purposes, Revenu Québec does not apply the same exemption rules as the CRA. Income that qualifies as tax-exempt under the Indian Act must still be reported on the TP-1 tax return. However, a deduction is then claimed to eliminate the taxable amount. Specifically, the exemption is claimed on line 293, where an individual with Indian status may deduct any portion of income included in their return that is considered to be income situated on a reserve. This deduction effectively replaces the direct exemption used for federal tax purposes.
Example:
Mathieu, a Quebec resident with Indian status, works for a band office located on a reserve. In 2024, he earns a total employment income of $60,000, all of which is connected to duties performed entirely on the reserve.
Answer:
Federal: Because all of Mathieu’s employment income is considered to be situated on a reserve, the entire $60,000 is exempt from federal income tax under section 87 of the Indian Act. He does not include this amount as taxable income on his federal T1 return. However, Mathieu must complete Form T90 (Income Exempt Under the Indian Act) to report the exempt income and provide details of his employment situation.
Quebec tax treatment (Revenu Québec): Mathieu must still report the full $60,000 on the appropriate income line of his TP1 return (for example, line 101 for employment income). He then claims a deduction on line 293 for the same amount — $60,000 — since this income was earned entirely on a reserve. This deduction eliminates the taxable impact, providing the same result as the federal exemption.
Mathieu’s taxable income is $0 federally and provincially, but the income is still reported and deducted on his Quebec return.