Nestled amongst the clouds, where the Himalayas kiss the sky, lies Sikkim—a state so special that even taxes take a hike. However, this is no invitation for any Suppandi, Shambu and Kalia to pack their bags in hopes of a tax-free jackpot. This exemption is a fascinating blend of history and law open only to the native residents of the state.
The origin of Sikkim’s tax exemption is rooted in its history. Initially an independent kingdom under the Namgyal dynasty, the Indo-Sikkim Treaty of 1950 transformed it into an Indian protectorate state, maintaining its internal autonomy. Eventually, it merged completely with India in 1975 predicated on the assurance that its unique identity and culture would be preserved, giving rise to Art. 371F of the Indian Constitution. This provision extended special protection to the state’s pre-merger laws, customs and socio-economic framework. The 2018 Union Budget’s inclusion of S.10(26AAA) of the Income Tax Act, 1961 is a legal reflection of this special status, providing tax exemptions to Sikkimese residents.
This exemption is far from a blanket tax holiday. It is applicable only to Sikkimese recognized through a Sikkim Subject Certificate or listed in the Register of Sikkim Subjects. Any income from agriculture, house property, local business and salaries from within the state, barring earnings from outside the state or by non-Sikkimese individuals, are exempt under this provision. The exclusion has sparked debates and courtroom drama, such as in the cases of Bhaichung Bhutia v. Union of India and Subba v. Union of India, in which the Supreme Court drew a firm line reaffirming that exemptions are meant to protect local incomes and meant for Sikkimese individuals alone.
The preferential tax exemption in Sikkim has been met with criticism, citing exacerbating social and economic disparities between native Sikkimese and non-Sikkimese residents. Additionally, the government trades off a chunk of its potential income, forcing it to rely on sources like tourism and hydropower. The risk of misuse and disputes over eligibility are ever-present despite the stringent verification process. The situation necessitates a fine balance between accommodating differences and fostering unity.
Streamlining the Sikkim Subject Certification process, exploring alternative revenue options like ecotourism and taking proactive measures aimed at alleviating marginalization anxiety among the non-native Sikkimese might be key to ensuring the preservation of equity and unity. Sikkim’s tax exemption is not just a perk but a promise to its heritage. It stands tall as a reminder of the fact that it is the government’s respect for the kaleidoscope of identities that makes India genuinely remarkable.
Comments are closed