Union Budget 2025: Do you know about the only tax-free state in India where residents earn crores without paying income tax?
Discover Sikkim, India’s only tax-free state, where residents enjoy complete income tax exemption under Article 371(F). Explore its financial benefits, historical significance and economic impact.
India's tax-free state: As Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on February 1, marking her eighth consecutive budget, let’s take a closer look at Sikkim—India’s only tax-free state.
Thanks to Article 371(F) and Section 10(26AAA) of the Income Tax Act, Sikkimese residents enjoy complete income tax exemption, making it a rare financial privilege in India. This special status, granted during Sikkim’s 1975 merger with India, boosts disposable income and encourages investments. Unlike taxpayers in other states, Sikkimese citizens are exempt from income tax—regardless of earnings, even in crores. This unique tax benefit fuels economic growth, supporting key sectors like tourism, agriculture, and small businesses.
India’s only tax-free state
![India’s only tax-free state India’s only tax-free state](https://cdn.zeebiz.com/sites/default/files/2025/01/29/348664-tax-42.jpg)
Legal foundation of tax exemption
![Legal foundation of tax exemption Legal foundation of tax exemption](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Who benefits?
![Who benefits? Who benefits?](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Income tax rules in India
![Income tax rules in India Income tax rules in India](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Income Tax filing for residents
![Income Tax filing for residents Income Tax filing for residents](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Historical context
![Historical context Historical context](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Economic benefits of tax exemption
![Economic benefits of tax exemption Economic benefits of tax exemption](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Economic growth and investment
![Economic growth and investment Economic growth and investment](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)
Impact on key sectors
![Impact on key sectors Impact on key sectors](https://cdn.zeebiz.com/ads/placeholder_image-zeebiz.jpg)