10(26AAA) Discrimination in Benefits Among the States

Assistant Manager (F&A)

Recently came across a section called 10(26AAA)

The Finance Act, 2008 have exempted U/s. 10 (26AAA) the following income accruing or arising to a Sikkimese individual from tax with retrospective effect from assessment year 1990-1991.

1) Income from any source in the state of Sikkim; or
2) Income by way of dividend or interest on securities.

Can any one kindly explain the logic behind this section that why a particular state alone has been given this benefit. Is this sound good ? how this dicriminating act has been passed WONDER !!!!!!!!!!!!!  Y SIKKIM ALONE IS A SPECIAL STATE IN THE COUNTRY AREN'T OTHER STATES TO ENJOY THIS .Y SIKKIM ALONE???? SO THAT OTHER STATE PEOPLE ALSO CAN ENJOY BENEFITS LIKE OUR BROTHER HOOD STATE

Total likes : 1 times


To get the ex rulers to sign instrument of accession to the Indian Republic, rulers were given privy purses that were later discontinued.

Lot of concessions may have had to be given to Sikkim for its allegiance to the Indian Union. You will also find special treatment for Goa that became part of Indian Union after independence. J&K has a special status too. No service tax in the state of J&K if I am not mistaken.

Everyone needs inducement. This is how the world runs. If we want more territory under our rule, we have to do a lot of give and take. Maybe the documents for Sikkim becoming a part of the Indian Union would have some conditions regarding taxes. You yourself have reproduced the wordings:-

Income from any source in the state of Sikkim.

Businesses and salaries arising in Sikkim will not be taxed to a Sikkim reisdent. Even Salary earned in Sikkim. However, if a Sikkimj individual comes to work in Mumbai, he has to pay tax. He is only exempted from the dividend which all of us are and interest on securities. Now Bank Deposits is not securities. Therefore the exemption is meaningless for day to day life.

Total likes : 2 times

Chartered Accountant

Dear Mr.Sivaprasad

Firstly let me bring to your attention that the language you have used to describe your query and obvious confusion regarding the exepmtion of Sikkimese from the purview of Income Tax Act 1961, is apalling, degratory and in fact provacative. Making statements like

" how this dicriminating act has been passed WONDER !!!!!!!!!!!!!  Y SIKKIM ALONE IS A SPECIAL STATE IN THE COUNTRY AREN'T OTHER STATES TO ENJOY THIS .Y SIKKIM ALONE???? "  IS

HIGHLY UNPROFESSIONAL and PROVOCATIVE. You are not only challenging in strong terms the rightful and deserving benefit extended to Sikkimese People without doing research but also challenging the Parliament`s Legislature.  Do you think that the learned Ministers,IAS officials and the empowered Standing Commitees and all the Tax experts involved in drafting the Income Tax act are fools ? That without any substantial reason such a ememption shall be passed in the parliament ?  (NOTE THAT SIKKIM HAS ONLY 1 MP IN THE PARLIAMENT )

Not only are u questioning the validity of the law but you are also with your strong language , provocating a dissent among the lesser learned members and ca students (like yourself) who are ready to protest and fight without first getting into the logic and without doing adequate resaerch.

It definitely is your right as well as your duty to raise questions on Law and get your doubts cleared in this forum but kindly use professional and respectalble language and make sure your language do not provocate,hurt or anger any section of Society.

Your Query as to wht exemption is Granted to Sikkim shall definitely be answered by me soon.

Hope you take may note of my advice.


CA Yash Marda

is utterly shameful and not expected out of a asdas asASDasdasdasdasdasda

Chartered Accountant

Now in answer to your queries :  :


Yes Sikkim is a SPECIAL STATE because it has the lowest population , lowest crime rate, among the highest levels of literacy, NO TERRORISM, NO MAOIST-NAXALITES, NO RELIEGIOUS\POLITICAL\CASTE\POLITICAL clashes or disturbances, it is one state which has the least pollution, the best EcoTourism destinations and STRIKES, GANGS, ROBBERY, VIOLENCE AGAISNT WOMEN OR EVE TEASING -  such terms are nonexistent. IT is one state that never produces any problems to the UNION OF INDIA.  It undoubtedly is a paradise in earth. SIKKIM IS SPECIAL .   However i a not a regional fanatic and i believe that every state in India is Special in its own way and All states are vital to constitute our Mother India.  


Sikkim is a state which shares its boundaries with 3 countries - Nepal,Bhutan and most importantly CHINA !!! CHINA has always been at uneasy relations with INdia and has been infringing parts of Kashmir,Uttaranchal and AP and till recently never recognized Sikkim as a part of India. Sikkim acts as a buffer state and is internationally and geo-politically strategically placed giving India a Suberb Advantage in the DEFENCE & INTERNATIONAL POLITICAL PERSPECTIVE specially against China. Indian Army has vital strategic posts and outposts in Sikkim which would be absolutely beneficial and crucial in the event of war against China (hopefully never) Hence the GEO-POLITICAL importance of Sikkim as a state cannot be undermined.


Sikkim due to it geographical features and tough terrian has remained industrially and educationally abckward as cmoounication and transport is difficult in this state due to the terrain in addition to lack of an Airport and Railway network within the state. This coupled with other natural reasons has left this state backward. Also a number of backward and tribal communities reside in the state who deserve good opportunities. My firend, EXEMPTIONS,ALLOWANCES AND DEDUCITIONS in Income tax is not given randomly or discriminatiorily but with due consideration by experts and in order to promote development and social upliftment in various fields and backward areas. Thus the entire NORTH EAST AND JAMMU & KASHMIR have a lot of exemptions and benefits not just Sikkim.


For your info prior to 16 may 1975 Sikkim was NOT A PART OF INDIA but a INDEPENDENT KINGDOM. In accordance with a treaty signed in 1950 it was an associate of India and provided support to India as well as allwed Indian Army to set its base in Sikkim to fight against Chinese in the INDO-CHINA WAR 1962. The INdo CHina war exposed the vulneralibility of India and highlighted the importance of Sikkim. The Indian Govt. realised the importance of assuming control over this Kingdom and after a chain of events and public demand for abolition of monarchy, a treaty was signed in 1973 and finally in 1975 Sikkim was merged into the Indian Union.

5. Merger of their independent Kingdom into Indian Union was accepted althoght with pain by the Sikkimese Subjects as loss of Identity as subjects of a INdependent Country is always painful (We Indians know it very well as we were also once under the  British) however they accepted it amicably and since them have co-operated with the INdian Union and have accepted themselves as INDIANS first and Sikkimese later. Thus in order to provide due respect to the sacrifice of their Independent Country and merger with INdia , ARTICLE 371F of the INdian constitution was inserted preserving the OLD LAWS (Sikkim Income Tax Manual 1948,Sikkim Companies Registration Act 1961 etc ) and Sikkim Subjects were promised their identity.

6.However recently Income Tax Act was extended into SIkkim causing much outrage as the Sikkim Subjects felt cheated and had a perception that 371F was being diluted , however the Indian Govt by inserting 10(26AAA) clarified its stand in this issue.

7.It may also be noted that this exemption is only upto a specific period (i heard it is 2017 but i am yet to verify it) and it is only for SIKKIM SUBJECT HOLDERS (issued Sikkim Subject Certificate by The Chogyal -The then King of Sikkim)  There are a lot of business communities who have been settled in sikkim since generations but are not exempt u\s 10(26AAA) as it applies only to holders of Sikkim Subject.This is a different issue and the contorversy is yet going on over the taxation of such left out sections of Sikkimese Society.\

I despite being a Sikkimese by birth and being settled in Sikkim since generations but am not a Sikkimese as per Sec 10(26AAA) and have to pay taxes in Sikkim.However i still support the section 10(26AAA) giving exemption to Sikkim Subjects  and also support the demand of its extention to the "left out business communities".

I hope i have provided enough reasons , not only Legal REasons to quell your outburst and do remember that in income tax is not always financial prudence that is considered but also socio-economic ,historic and strategic reasons while making the laws.

With due Regard and Queries or Arguments if any are welcome.


Total likes : 4 times

CA Final Student


For the purpose of this clause, 
“Sikkimese” shall mean –
(i) an individual, whose name is recorded in the 
register maintained under the  Sikkim Subjects 
Regulation, 1961 read with the Sikkim Subject Rules, 
1961 (hereinafter referred to as the “Register of Sikkim 
Subjects”), immediately before the 26th
 day of April, 
1975; or
(ii) an individual, whose name is included in the 
Register of Sikkim Subjects by virtue of the Government 
of India Order No. 26030/36/90-I.C.I., dated the 7
August, 1990 and Order of even number dated the 8
April, 1991; or 
(iii) any other individual, whose name does not 
appear in the Register of Sikkim Subjects, but it is 
established beyond doubt that the name of such 
individual’s father or husband or paternal grandfather or 
brother from the same father has been recorded in that 
                                                            (emphasis supplied)
Manager (Advance)

Except social reasons other rasons of CA Yash Marda are correct.

Manager (Advance)

I think the main reason is to please the people of Sikkim so as to get their support on the border issues, the country have with China.



Your are not logged in . Please login to post replies

Click here to Login / Register