THIS is only state in India where you don’t have to pay tax, residents here can earn in crores without paying a single penny, here’s why

Sikkim is the only state in India where people do not have to pay income tax. This special rule exists because of the state’s history and the conditions under which it became part of India. The tax exemption is protected by Article 371(F) of the Constitution and Section 10(26AAA) of the Income Tax Act, 1961.

Sikkim became India’s 22nd state on May 16, 1975. Before joining India, Sikkim was an independent kingdom ruled by the Chogyal Dynasty. It had its own laws, including its own tax system called the Sikkim Income Tax Manual, 1948.

When Sikkim merged with India, the Indian government promised to keep many of Sikkim’s original laws unchanged. Because of this agreement, Sikkim was allowed to keep its special tax rules, and its residents were given the benefit of not paying income tax.

What Section 10 (26AAA) says

According to Section 10 (26AAA), the income of any resident of Sikkim is not taxed. This rule applies to all kinds of income — whether it comes from interest on securities or from dividends.

Income exempt under section 10(26AAA)

•  Income earned within Sikkim: Any income a Sikkimese person earns inside the state is not taxable. This can be salary, business income, rent, or money earned from any other work or source within Sikkim.
• Dividend or interest income from Sikkim: If a Sikkimese resident earns money through dividends or interest on securities, and this income is generated in Sikkim, it is also fully exempt from income tax.

Who qualifies for this Exemption?

People who were living in Sikkim before it became a part of India also get this benefit. Under Section 10 (26AAA), anyone who settled in Sikkim before its merger with India is exempt from paying income tax, even if their name is not listed in the Sikkim Subjects Regulations, 1961.

The following assessees qualify for this exemption:

• Individuals who were recognised as Sikkimese subjects before April 26, 1975.
• Their direct descendants
• Holders of Sikkim Subject Certificates.