In India, the responsibility for paying taxes on individual or business earnings lies with the taxpayer in question, which means that in most cases, a state can charge income tax to anyone who qualifies for federal income tax purposes. However, for the state of Sikkim, that is different. The Income Tax Act allows the government to grant Sikkimese citizens a special benefit that enables people to live in Sikkim without having to pay any form of income tax. The law that provides this benefit is under section 10 (26AAA).
Many people will probably think this is not possible, but it is. Since Sikkim was made part of India on April 26, 1975, Sikkim’s residents have been given this special privilege by the Indian Parliament. Would you, as a Sikkimese resident, take advantage of this particular income tax exemption?
Who will get this exemption?
According to the Income Tax Act, this benefit is not for everyone. Only certain people are eligible for this exemption. But who? First, those who were registered as residents of Sikkim before April 26, 1975. Second, those who have a ‘Sikkim Subject Certificate’. And the next generation of those people.
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If you start living in Sikkim?
Remember, those who have moved to Sikkim from other parts of India after 1975 do not fall under this rule. You will not get the benefit of this tax exemption only if you start living there.
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Is there no tax on any income?
If someone in Sikkim does any business, or works or receives dividends and interest on securities from Sikkim, they do not have to pay any income tax. However, if that person earns any income from anywhere outside Sikkim, then he will have to file an income tax return like an ordinary Indian citizen.
This constitutional privilege provides economic protection to those who are the sons of the land of Sikkim. However, it is important to understand the subtle legal nuances in this regard before planning to invest in Sikkim or settle there permanently.
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