Tax Free State: People of this state of India do not have to file ITR, the government cannot take even ₹1 tax

The reason for no income tax in Sikkim is not a government lottery, but a deep historical and legal agreement. Under the terms of merger with India in 1975, the special status was granted to the people of Sikkim to protect their unique identity and rights, which was implemented through Article 371F of the Constitution and Section 10(26AAA) of the Income Tax Act.

Tax Free State: It is the duty of every responsible citizen to give an account of his yearly income and pay the tax on it. These days, crores of employed and business people of India are busy filing Income Tax Return (ITR). But do you know that there is a state in India where people do not have any tension about filing ITR? This is a state where even if a person earns crores of rupees, the government cannot take even ₹1 income tax from him.

This is not a story, but a reality. Sikkim is that beautiful and unique state of India. The natives here are completely exempted from tax under the Income Tax Act. Let us know how and why Sikkim got this special status.

Why is Sikkim so special?

To understand this tax exemption, we have to turn the pages of history. When India became independent in 1947, Sikkim was not a part of India. It was an independent country ruled by the Chogyal dynasty. The Government of India looked after its defence and foreign affairs. In 1975, as per the wishes of the people of Sikkim, after a referendum, it was completely merged with India and it became the 22nd state of India. But this merger happened with some special conditions. Some special provisions were added to the Indian Constitution to maintain the special status and identity of the people of Sikkim.

That ‘protective shield’ of law: Article 371F and Section 10 (26AAA)

This tax exemption given to Sikkim is not a gift, but an important part of the terms of merger, which has been legally protected. Two main legal provisions work behind this.

Article 371F of the Constitution

When Sikkim merged with India, this special article was added to the Constitution. This article provides protection to the old laws of Sikkim and ensures that other laws of India do not take away the special rights of the people here. In simple words, it gives a constitutional safeguard to the people of Sikkim.

Section 10(26AAA) of the Income Tax Act

Based on this constitutional protection, a special section, 10(26AAA), was added to the Indian Income Tax Act, 1961. This section clearly states that ‘residents of Sikkim’ will not have to pay any income tax on income from any source. Whether their income is from salary, business or any other investment, it is completely tax-free.

Who gets this tax exemption?

This is the most important question. Does every person living in Sikkim get this exemption? The answer is – no.

This Income Tax Exemption is available only to those who are defined as ‘Sikkimese’. Initially, it was available to those whose name or the name of their ancestors was recorded in the register maintained under the Sikkim Subjects Regulation, 1961. However, there was some controversy regarding this definition as it did not include people of Indian origin who had settled in Sikkim for a long time before the merger. The Supreme Court gave a historic verdict on this matter in 2023. The court said that this is discriminatory and the benefit of Sikkim Tax Exemption should be given to all Indian citizens who had settled in Sikkim on or before the date of merger (April 26, 1975).

Do people from other states also get the benefit?

Absolutely not. If you are a resident of Delhi, Mumbai, or any other state and you go and settle in Sikkim for job or business, then you will not get this tax exemption. You will have to pay tax on your income as per the general income tax rules of India. This exemption is only for the original residents of Sikkim and the old Indian settlers who lived there before the merger.

The post Tax Free State: People of this state of India do not have to file ITR, the government cannot take even ₹1 tax first appeared on informalnewz.

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