New Delhi: Everyone who earns a certain amount of income is liable to pay tax in India. It is mandatory for every taxpayer in the country to file Income Tax Return (ITR). The Ministry of Finance looks in the matters of change in income tax slab every year during the presentation of annual budget. However, there is one Indian state where the residents do not have to pay taxes.
Nestled in the Himalayas and a home to scenic alpine meadows, blue-green hills, glaciers and wildflowers lies Sikkim, India’s best-kept northeastern state. Sikkim, which has an approximate population of 6.74 lakh, is exempted from paying income tax.
Why Sikkim do not have to pay income tax
The small hilly northeastern state – Sikkim – borders Tibet in the north and northeast, Bhutan in the east, Nepal in the west and West Bengal in the south. Sikkim was an erstwhile kingdom which merged into India on condition that it would continue with its old laws and special status as envisaged in Article 371(f) of the Indian constitution. This is why the state follows the Sikkim Income Tax Manual 1948. Under this tax manual, Sikkim residents do not have to pay taxes to the Centre.
Sikkim’s tax laws were repealed in 2008 where Union Budget announced section 10 (26AAA) in which the state’s residents were exempted from paying taxes. The residents of the state also don’t have to have the mandatory PAN card requirement. Earlier, market regulator SEBI exempted the PAN requirement for Sikkim residents for investments in the Indian securities market and mutual funds.
Sikkim was ruled by a Buddhist priest-king known as the Chogyal. It became a princely state of British India in 1890. After 1947, Sikkim continued its protectorate status with the Republic of India. It enjoyed the highest literacy rate and per capita income among Himalayan states. In 1973, anti-royalist riots took place in front of the Chogyal’s palace. In 1975, the monarchy was deposed by the people. A referendum in 1975 led to Sikkim joining India as its 22nd state.
The official languages of Sikkim include English, Nepali, Sikkimese and Lepcha. Additional official languages include Gurung, Limbu, Magar, Mukhia, Newari, Rai, Sherpa and Tamang for the purpose of preservation of culture and tradition in the state.