All citizens of India are liable to pay income taxes under the Income Tax Act of 1961
The original inhabitants of Sikkim are exempted from payment of Income tax under section 10(26AAA) of the Income Tax Act, 1961
When Sikkim, an erstwhile kingdom, was merged into India, it was stated that its old laws and special status would remain intact
Therefore, the original inhabitants of Sikkim follow the Sikkim Income Tax Manual 1948, which governed the tax laws since 1975. Under this rule, no resident of Sikkim was supposed to pay taxes to the Centre under the Income Tax Act, 1961
In the year 2008, Sikkim's tax laws were repealed. The Union Budget that year exempted the state residents from tax by inserting section 10 (26AAA)
Under Section 10 (26AAA), the income accrued to Sikkimese individuals in the state or by way of dividends or interest on securities from elsewhere was exempted
In 2008, the Centre, led by UPA, granted I-T exemption to over 94% of Sikkimese people but left out the 500-odd families who refused to give up their Indian citizenship
Market regulator Securities and Exchange Board of India has exempted Sikkim residents from the mandatory PAN requirement for investments in the Indian securities market and mutual funds
Sikkim became a protected state of India after the Indo-Sikkim Peace Agreement was signed in 1950. In 1975, the state was merged with India. At that time, Sikkim’s ruler was Chogyal (King) Tashi Namgyal
Chogyal Tashi Namgyal passed the Sikkim Income Tax Manual in 1948. Therefore, when India was merged with India, the terms of income tax exemption for Sikkimese people were imposed on them
Even though Finance Minister Nirmala Sitharaman has tweaked the income tax slabs in this year's Union Budget, Sikkim's tax laws remain unchanged
Earlier in February, the Supreme Court extended the benefit of income tax exemption provided under Section 10 (26AAA) to all Sikkim residents, including those who permanently settled prior to the merger of Sikkim in the Union of India
The Supreme Court, in its verdict on IT exemption to old settlers in Sikkim, had said there was no difference made out between the original inhabitants of Sikkim, namely the Bhutia-Lepchas and the persons of foreign origin settled in Sikkim like the Nepalis or persons of Indian origin who had settled down in Sikkim generations back
The reference led to protests across Sikkim. On February 9, the Supreme Court ordered the removal of certain remarks from its judgement wherein it had referred to Sikkimese-Nepalis as people of foreign origin