Sikkim – India’s Only Income Tax-Free State

Prelims

Why is Sikkim Exempt from Income Tax?

• Sikkim remains exempt under the Income Tax Act of 1961, owing to its merger with India in 1975, a provision safeguarded under Article 371F of the Constitution.
• This special status ensures that Sikkimese residents do not pay income tax, a privilege exclusive to the state.

Key Exemptions and Limitations

• Sikkimese women who marry non-Sikkimese individuals (after April 1, 2008) lose tax exemption benefits.
• Tribal communities in certain states (Ladakh, Arunachal Pradesh, Manipur, Mizoram, Nagaland, and Tripura) also enjoy income tax exemptions under Section 10(26) of the Income Tax Act.