Did you know there is one state in India where eligible local residents do not pay any central income tax, regardless of how much they earn?

That state is Sikkim.

Yes — while the rest of India follows the Income Tax Act, eligible registered Sikkimese residents enjoy complete exemption from central income tax on income earned within the state.

This unique benefit is protected by:

• Article 371F of the Constitution of India
• Section 10(26AAA) of the Income Tax Act

This makes Sikkim one of the most unique tax jurisdictions in the country.

Let’s understand why.

The answer lies in history.

Before 1975, Sikkim was an independent kingdom with its own legal and tax system.

When Sikkim officially merged with India in 1975 and became the 22nd state, the Government of India agreed to preserve certain legal protections for the people of the state.

This protection was later embedded into the Constitution through:

Article 371F

This article safeguards Sikkim’s pre-merger laws, identity, and special rights.

One of those protections later extended into taxation.

Section 10(26AAA) of the Income Tax Act grants full income tax exemption to eligible Sikkimese individuals.

The exemption applies to:

• salary income
• business income
• rental income
• interest
• dividend income
• any other source of income arising within Sikkim

There is no upper income limit under this exemption for eligible persons.

That means whether someone earns ₹5 lakh or ₹5 crore, the income can still be exempt if the legal conditions are met.

This is the most important part.

Not everyone living in Sikkim gets this exemption.

The benefit applies specifically to eligible Sikkimese individuals, including:

• persons whose names were recorded in the Register of Sikkim Subjects before April 26, 1975
• their direct descendants
• holders of valid Sikkim Subject Certificates / Certificate of Identification

So simply moving to Sikkim does not automatically make someone tax-exempt.

The answer is:

No

This is one of the most searched questions.

A person cannot simply relocate to Sikkim and stop paying income tax.

The exemption is based on legal identity and historical subject status, not just present residence.

This means:

This rule exists because the 1975 merger agreement was not just political.

It was also constitutional and legal.

The tax exemption was designed to:

• preserve Sikkim’s historical rights
• protect economic stability
• respect pre-merger legal arrangements
• safeguard local identity

This is why Article 371F remains highly significant even today.

For this kind of state-specific central income tax exemption for eligible local residents, yes — Sikkim is unique.

Other regions in India may have tax exemptions under specific tribal provisions such as Section 10(26), but those apply to scheduled tribes and specified areas, not an entire state in the same way.

That is why Sikkim is often searched as:

Generally, the exemption covers:

• income arising from sources within Sikkim
• dividend income
• interest on securities

However, income generated outside the state may not always qualify.

The exact applicability depends on the source and legal interpretation.

This is why tax consultation is advisable for complex cases.

Sikkim remains the only state in India where eligible registered local residents can legally pay zero central income tax.

This special status is protected under:

• Article 371F
• Section 10(26AAA)

The exemption is a direct result of the 1975 merger agreement and continues to protect the rights of eligible Sikkimese individuals and their descendants.

It is one of the most unique constitutional tax provisions in India.

Which state in India has zero income tax?

Sikkim is the only state where eligible local residents are exempt from central income tax.

Can anyone move to Sikkim and avoid tax?

No. Only eligible Sikkimese individuals and their descendants qualify.

What law gives Sikkim tax exemption?

Article 371F and Section 10(26AAA).