Tax Free Sikkim: New Delhi: Income up to Rs 7 lakh is no longer taxable under the new income tax regime. But there is one state in the country where 95% of the population does not pay income tax. Sikkim is a state in India.
The natives of Sikkim state are exempted from paying income tax. But now there is also a demand to stop the income tax exemption to the indigenous people of Sikkim. Many people say that this exemption given to Sikkim residents is also being misused by outsiders to avoid paying income tax. Some call it India’s tax haven.
The northeastern states of the country enjoy special status under Article 371-F of the Constitution. Therefore, the natives of Sikkim are exempt from income tax under Section 10 (26AA) of the Income Tax Act, 1961.This means that the people of the state of Sikkim do not have to pay any tax on their income. After this decision of the Supreme Court, 95% of the population of the state has been exempted from tax.
Earlier, only people holding Sikkim subject certificates and their descendants were considered to be the original residents of the state. They were made Indian citizens under the Sikkim Citizenship Amendment Order, 1989. But the Supreme Court in one of its judgments has also given the status of indigenous people of Sikkim to the people of Indian origin living in Sikkim till April 26, 1975 (a day before Sikkim acceded to India).
The terms of the merger included exemption from income tax
The state of Sikkim was established in 1642 and fully merged with India in 1975. After the Indo-Sikkim Peace Accord in 1950, Sikkim came under the protection of India. The Chogyal ruler of Sikkim issued the Sikkim Income Tax Manual in 1948.
It was about not taking income tax from the people of the state in any way. The terms of Sikkim’s accession to India included exemption from income tax, which India accepted. Due to this condition, they have been exempted from income tax.
Demand for abolition of tax-free state status
However, the demand to end the income tax exemption to the residents of Sikkim has been repeatedly raised. BJP leader and advocate Ashwani Upadhyay calls Sikkim a tax haven. Apart from this, many times there are reports of misuse of income tax exemption. There has also been a case of opening a large number of demat accounts in the name of the people of Sikkim.