As tax season begins across India, millions of people prepare to deal with deductions, exemptions, and income tax filings. But hidden in the peaceful mountains of the Northeast lies a rare exception—Sikkim.
Here, the stress of tax season doesn’t affect the native residents. Their earnings remain untouched by income tax, allowing them to enjoy complete freedom from this financial burden.
In this quiet state, crores of rupees are earned without being taxed, making Sikkim a unique place in India during the Income Tax Return (ITR) Filing for FY25, drawing attention from across the country.
Why Sikkim Is Tax-Free: A Look at Its History, Laws, and Economy
This tax-free status isn’t random—it has strong historical roots. It dates back to 1975, the year Sikkim officially became a part of India.
At that time, special protections were put in place to preserve the cultural and economic rights of Sikkim’s native people.
These protections continue even today, allowing only native residents of Sikkim to enjoy full income tax exemption. Outsiders or non-natives living or doing business in Sikkim do not get this benefit.
The exemption is supported by legal notifications and amendments. While Sikkimese residents still complete basic tax filing steps, they don’t actually pay income tax.
This means they can report high earnings without any tax burden, since their income is fully exempt.
This rule sets Sikkim apart in India’s taxation system, but it also raises questions—how does the state manage its finances?
Since the government cannot collect income tax from native residents, it depends on other sources of revenue like GST (Goods and Services Tax), tourism, agriculture, and financial support from the central government.
This system allows the state to run its economy while keeping the income tax exemption for natives intact.
Setting the Record Straight: Who Really Gets the Tax Exemption?
There are many myths about Sikkim’s tax-free status. To be clear, this benefit is only for native residents of Sikkim. It does not apply to everyone living there or running a business in the state.
Only those officially recognized as natives qualify, making it a special right—not a loophole in the system.
As the ITR Filing for FY25 continues, Sikkim’s tax-free promise remains unchanged. The income tax exemption for its native people is still in place, standing firm in a country where uniform taxation is often debated.
For now, Sikkim remains the only place in India where native residents live without the burden of income tax—a rare and remarkable situation.
