This is the only state in India where people do not have to pay income tax! What exactly is the reason?

As the deadline for filing Income Tax Returns (ITR) approaches across the country, taxpayers are busy filing their returns. However, are you aware that there is a state in India where the majority of residents are exempt from paying income tax? That state is Sikkim, considered the only state in the country where residents enjoy an income tax exemption due to special legal provisions.

What is the reason?
It is worth noting that Sikkim was not originally part of India; it was an independent kingdom (the Kingdom of Sikkim). Sikkim became India's 22nd state following a referendum in 1975. At the time of its merger with India, Article 371F was added to the Constitution to safeguard the rights of the people and preserve existing laws. Under this special provision, Sikkim was granted specific legal and administrative rights to protect its traditional systems and the interests of the local population.

Who is eligible for this benefit?
Subsequently, Section 10(26AAA) was inserted into the Income Tax Act, 1961. Under this section, the income of individuals recognized as 'Sikkimese' was exempted from income tax. The objective was to uphold the special rights of local residents who were indigenous to Sikkim before its merger with India.

However, it is important to understand that not everyone residing in Sikkim is exempt from tax. This exemption applies only to those who fall under the 'Sikkimese' category as defined by law. If an individual has moved to Sikkim from another state or does not fall within this specific category, standard income tax rules apply, and they may be required to file an ITR.

In essence, this is not a new government scheme or a recently introduced tax benefit; rather, it is part of the constitutional and legal agreement established at the time of Sikkim's merger with India. For this reason, Sikkim remains the only state in India where eligible local residents enjoy a special exemption from income tax.

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