Income Tax Exemption: There is also a unique state in the country where people do not have to pay income tax and that state is Sikkim. According to Article 372 (F) of the Indian Constitution, the people of Sikkim are kept out of the purview of taxation.
Income Tax Exemption: The time to pay income tax is near. Every person in the country whose income comes under the tax net has to file taxes. Those whose income is outside the purview of taxation are also advised to file taxes.
The Income Tax Act, of 1961 makes tax filing mandatory in the country. But do you know that there is a state in the country whose people are exempted from paying taxes? Yes, there is one such unique state in the country where people do not have to pay income tax and that state is Sikkim. According to Article 372 (F) of the Indian Constitution, the people of Sikkim are kept out of the purview of taxation.
Why the people of Sikkim do not have to pay taxes?
Sikkim was merged with India in 1975, but Sikkim joined India on the condition that it would retain its old laws and special status, which was accepted. Due to this, Sikkim follows its own tax rules, which were made in 1948. Under the Sikkim Income Tax Manual 1948, no resident of Sikkim had to pay tax to the Central Government.
But getting a full exemption in 2008
In the year 2008, the people of Sikkim have been completely exempted. Sikkim’s tax laws were repealed. In the Union Budget of that year, a separate section was added to the Income Tax Act – section 10 (26AAA), under which the residents of the state would not have to pay tax. Section 371(f) was added, which also gives constitutional protection to the special status given to Sikkim. The government granted tax exemption to 94% of Sikkimese residents, but there were a few families who were kept in this net because they retained Indian citizenship.
What does Section 10 (26AAA) say?
Under Section 10 (26AAA), there is a rule that the income of any resident of Sikkim will remain outside the tax net, whether it comes from interest or dividends from any kind of security. It states that all persons who had settled in Sikkim prior to its merger with India, whether or not their names appear in the register under the Sikkim Subjects Regulations, 1961, are exempt under Section 10(26AAA) of the Income Tax Act.