If you are drafting a T4 slip for a member of the armed forces whom you pay, the Canada Revenue Agency has strict guidelines on reporting this income. First, note all of the income earned in box 14 of the T4 slip.
If any of the income was earned in a medium or high-risk operation, note this amount in one of the boxes at the bottom of the form and include code 43 next to it. This income is non-taxable.
When your employee files his taxes, he should report the income from box 14 on line 101 of his income tax return. Then, he should note the amount that appears with code 43 on line 244. The amount on line 244 is subtracted from the amount on line 101 to determine his taxable income.