Sikkim is the only state in India where residents do not have to pay any income tax on their earnings. This exemption is due to the special status granted to Sikkim under Article 371-F of the Indian Constitution.
Why is Sikkim Exempt from Income Tax?
When Sikkim merged with India in 1975, it was under the condition that it would retain its old laws and special status. This includes exemptions from certain Indian laws, such as the Income Tax Act, 1961.
Special Provisions: Article 371-F and Section 10 (26AAA)
Article 371-F: This article provides special provisions for Sikkim, preserving its unique legal and administrative framework.
Section 10 (26AAA) of the Income Tax Act, 1961: This section states that the income of a resident of Sikkim is exempt from income tax. This exemption covers income from various sources, including interest on securities and dividends. It applies to individuals who were settled in Sikkim before its merger with India and whose names are recorded in the Sikkim Subjects Register of 1961.
