The Himalayan Hack: How Sikkim Residents Dodge Income Tax—Legally

While the ITR filing season is getting more hectic across India, there is one exception—Sikkim. While taxpayers across the nation are calculating deductions and liabilities, original Sikkimese residents are legally free from paying a single rupee of income tax, no matter how big their income is.

 

Key Points:

 

Zero Tax, No Catch: The native Sikkim residents pay nothing whatsoever in income tax—crores or no crores. It is not an interim measure but a constitutional provision under Article 371(F) and Section 10(26AAA) of the Income Tax Act.

 

Who is Eligible?

 

The only people who can be considered eligible are those who are "Sikkim Subjects" under the 1961 Sikkim Subjects Regulation, or their close bloodline. Migrants or non-native inhabitants residing in Sikkim are not eligible.

Why the Exemption: When Sikkim joined India in 1975, it had its own taxation system. In connection with the same, the state was accorded special status by the Indian Constitution to make the state fiscally independent.

No income limit: Depending on whether a Sikkimese citizen earns ₹5 crore or ₹5 lakh, his/her earnings are taxed zero. This includes salary, business income, capital gains, and income from interest.

Economic Benefit: This exception gives the residents a tremendous disposable income advantage because, in Sikkim alone of all the states in India, individuals are legally allowed to keep 100% of what they earn.

 

While the rest of India is busy dealing with new taxation legislation and deadlines, Sikkim's special status continues to be the subject of interest—and envy.

 

Sources: Zee Business, Financial Express, MSN News