First Nations students in Canada are protesting changes to federal tax rules that may soon require them to pay income tax on scholarships and bursaries they receive to attend a university or college.

"Post-secondary education has been determined to be one of the most important means of improving the lives of First Nations people in Canada," said Cathy Wheaton, a Master's student at the First Nations University of Canada in Regina. "The taxation of support funding for education will only add to the financial burden of First Nations students."

Government-funded scholarships and bursaries for First Nations students have not been taxed since 1978. That's when Revenue Canada accepted that financial assistance for education was a treaty right.

However, in reviewing policy last year, Indian and Northern Affairs Canada determined that free tuition is "not a treaty right and that Revenue Canada's acceptance of this point was in error."

That decision has unleashed a storm of protest among Canada's First Nations.

"This flies in the face of not only our right to education and 25 years of taxation policy, but, more important, is contrary to the historic First Nations and Crown fiduciary relationship," said Phil Fontaine, national chief of the Assembly of First Nations.

Government officials insist the new rules won't affect most First Nations students since full-time students normally don't earn enough money to pay tax.

But Fontaine indicated it is also a matter of principle. "We will not allow the government to tax our rights."

In the face of mounting criticism from the AFN and other groups, the tax department recently announced a one-year moratorium on reporting in order to consult further with students and band councils.

Fontaine said the AFN will use the delay to pressure the government to scrap its "wrong-headed and ill-advised proposal. We have more than a year to ensure that the right to education does not become a taxable benefit."