Introduction of clause

According to clause 26 AAA, to be inserted in Section 10, “any income, which accrues or arises to a Sikkimese individual from any source in the State of Sikkim or by way of dividend or interest on securities, shall not be included in the total income of such individual”

Benefit is sought to be conferred w.e.f. April 1, 1990

The State still enjoys the old laws which are enshrined in Article 371F of the Constitution

Sarikah Atreya

Gangtok, March 3

The Chief Minister, Mr Pawan Chamling, has welcomed the decision of the Central Government to exempt all incomes of Sikkim subjects from the purview of direct taxes, which has been a long-pending demand of the State.

“Fourteen years of persistent efforts have paid off,” Mr Chamling said. “Our stand on this issue has not wavered even once in the past 14 years. We have throughout argued that the ideal situation would be to make all of Sikkim income tax-free and the continuance of the State’s 1948 Income Tax Manual. If this was not possible, we had suggested Sikkim subjects should be exempted,” he said.

The Finance Minister, Mr P. Chidambaram, in the Budget, has included an amendment to Section 10 of the Income Tax Act. According to Clause 4 of the Finance Bill, a new clause, christened 26 AAA is proposed to be inserted in Section 10, under which the income of a Sikkimese individual from any income arising out of the State of Sikkim has been exempted from income tax.

Exemption conditions

This apart, an individual’s dividend income from anywhere is also proposed to be exempted. The new clause specifies that “any income, which accrues or arises to a Sikkimese individual from any source in the State of Sikkim or by way of dividend or interest on securities, shall not be included in the total income of such individual”.

Residents of Sikkim would be eligible for exemption, excluding the non-Sikkimese spouse of a Sikkimese. The benefit is sought to be conferred with effect from April 1, 1990.

Sikkim citizen

As defined by the Centre, a “Sikkimese” is anyone whose “name is recorded in the register maintained under Sikkim Subjects Regulation, 1961, read with Sikkim Subject Rules, 1961, immediately before 26 April, 1975; or individuals whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.Ci. of August 7, 1990 and Order of even number dated April 08, 1991; or, any other individual whose name does not appear in the Register of Sikkim Subjects but it is established beyond doubt that the name of such individual’s father or husband or paternal grandfather or brother from the same father has been recorded in that Register.”

Special status

Central direct taxes are not extended to Sikkim. The State still enjoys the old laws which are enshrined in Article 371F of the Constitution, which provides a special status to Sikkim after its merger with the Indian Union in 1975.

(This article was published in the Business Line print edition dated March 4, 2008)
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