Indian State Where People are exempt from Income Tax

Income Tax is the part of your income that you are required to pay to the tax authorities. You are liable to pay the taxes, no matter if you are an employee in a company or run your own business, if your income exceeds the prescribed basic exemption limit. The Income Tax laws are enforced on every Individual in the country. However, there is a state in India where people do not pay income tax at all.

Yes, you have read it right. Sikkim is the only state where people do not have to pay taxes. It is a tax-free state under section 10 (26AAA) of the Income Tax Act.

Sikkim is a state in the northeast part of india. It is one of the smallest states in India. Sikkim was a small kingdom with a king ruling it for more than 330 years. However, on May 16, 1975, it joined India and became the 22nd state of India.

Before merging with India, Sikkim had its own tax system, where its residents were not required to pay income taxes to the Centre, no matter how much their income was. The merger of Sikkim with India had this condition, that Sikkim’s old tax structure would continue after the merger.

Therefore, as per Section 10 (26AAA) of the Income Tax Act, Sikkimese individuals earning from any sources in Sikkim or through dividends, or interest on securities, this income would fall under the tax exemption Section 10 (26AAA).