Yes, it’s possible. In Financial Year 2024-25 (FY25), you can earn crores and legally pay zero income tax—but only if you're residing in a specific part of India. While most of the country is subject to the income tax laws under the Income Tax Act, 1961, there exists one region where these laws do not apply.
Which State in India Is Tax-Free?
The answer is Sikkim—a northeastern state in India that has a unique tax exemption status for certain residents under historical provisions. Here's how it works:
Why Residents of Sikkim May Not Pay Income Tax
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Individuals born in Sikkim before April 26, 1975, are exempt from paying income tax under Section 10(26AAA) of the Income Tax Act.
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This exemption is tied to the state's special constitutional status post its merger with India.
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These residents can earn crores through business, investments, or inheritance and still be exempt from income tax on that income.
Who Qualifies for This Exemption?
To be eligible:
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The individual must be a Sikkimese subject as defined in old Sikkim laws.
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Must have Sikkim Subject Certificate (SSC) or a Certificate of Identification (COI).
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Applies to individuals only, not companies or firms.
What Income is Exempt?
For qualifying Sikkimese individuals:
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All types of income are exempt from income tax: salary, business, capital gains, rent, interest, etc.
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No need to file ITR unless claiming a refund or under certain transactions.
Financial Advantage
If you're eligible and reside in Sikkim:
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You can structure your finances to legally save lakhs to crores in taxes.
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Business income, real estate gains, dividends—all untaxed.
FAQ: Tax-Free Income in Sikkim (FY25)
Q1: Can anyone move to Sikkim and claim zero tax?
A: No. Only individuals with Sikkimese status by birth and the appropriate documentation (SSC or COI) are eligible for income tax exemption.
Q2: Is this tax exemption available for companies registered in Sikkim?
A: No. The exemption is only for individual Sikkimese residents, not for businesses, companies, or LLPs.
Q3: Is the exemption applicable to salaried individuals as well?
A: Yes, as long as the person qualifies under Section 10(26AAA), even salary income is tax-exempt.
Q4: Do Sikkimese individuals need to file an ITR?
A: Filing is generally not mandatory unless there is tax deducted at source (TDS) or for certain high-value financial transactions.
Q5: Is this exemption likely to change in FY25?
A: Currently, there is no official announcement indicating the withdrawal of this exemption. However, individuals should stay updated with the Union Budget and CBDT circulars.
Important Note
The exemption is not a loophole or tax evasion tactic. It is rooted in constitutional and legislative provisions, and only genuine, qualified residents of Sikkim can avail it.
Final Thoughts
For FY25, while most Indians plan around deductions, exemptions, and old/new tax regimes, eligible Sikkim residents enjoy the ultimate tax-free status. If you’re looking to understand how to structure your finances or legally reduce your tax outgo, this unique scenario is worth knowing—even if it’s not applicable to everyone.
Published : May-24-25 By : Abhishek Rana