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While taxpayers across the country are all set to file their income tax returns for the financial year 2024–25, there’s one Indian state that continues to follow a completely different rulebook—Sikkim. Here, certain residents are not required to pay any income tax, no matter how high their earnings may be. This is not a temporary relaxation or a clever tax-saving trick. It is a long-standing legal exemption rooted in the Constitution and backed by central tax law.

Sikkim enjoys a special constitutional status under Article 371(F), and this status is the reason why some residents are entirely free from central income tax. The same exemption is also reflected in Section 10(26AAA) of the Income Tax Act. Thanks to this unique provision, qualifying individuals in Sikkim are legally allowed to earn any amount—even in crores—without paying income tax to the central government.

The tax-free status dates back to 1975, the year when Sikkim officially became a part of India. At the time of the merger, it was agreed that certain administrative and legal systems would be preserved. This included keeping Sikkim’s own income tax laws intact for its native population. That arrangement continues even today. While the rest of the country follows a uniform tax code, Sikkim remains the lone exception where some people never have to worry about paying income tax at all.

Not every resident of the state enjoys this benefit. The exemption is specifically meant for individuals who are recognised under the Sikkim Subjects Regulation, 1961. In other words, only native Sikkimese whose names were registered in the official records before the merger with India can claim this privilege.

Those who moved to Sikkim later, even if they have lived there for decades, are not eligible for the exemption.

The law is clear: if you qualify, your entire income—be it from a job, business, capital gains, or investments—is exempt from central income tax. This makes a significant difference, especially for those with high earnings, as they can retain the full value of their income without any tax deductions.

This tax-free environment has several side effects. Eligible residents tend to enjoy higher savings and greater financial flexibility. With more disposable income, many invest locally, support businesses, or start their own ventures. This in turn helps stimulate the regional economy. The absence of income tax has also made Sikkim a unique example of how regional laws can shape financial behavior.

While certain types of income are exempt from tax across the country—like agricultural income, NRE account interest, scholarships, and HUF distributions—there is no other state in India where a section of the population is fully exempt from income tax based on their native status. Sikkim remains the only state where such a provision exists—and it has stood the test of time for nearly five decades.

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