CBDT Clarifies definition of 'Sikkimese' under IT Act

The term “Sikkimese” defined for the purposes of Section 10(26AAA) of Income Tax Act, 1961, is only for the purposes of the Income-tax Act, 1961, and not for any other purpose, clarified the Central Board of Direct Taxes (CBDT).

Following the decision of the Supreme Court in a writ petition, certain amendments have been made in the section 10 (26AAA) of the Income Tax Act.

This section of the Income Tax Act describes "exempted income," or revenue that is excluded from total income calculations for calculating an individual's tax and was added with retrospective effect on the date the Income Tax Act became applicable in Sikkim by the Finance Act of 2008.

The Supreme Court ruled in Association of Old Settlers of Sikkim and Ors V. Union of India, 2013, that Section 10(26AAA) of the Income Tax Act's definition of "Sikkimese" is unconstitutional because it excludes old Indian settlers who permanently settled in Sikkim before Sikkim joined India on April 26, 1975, which made the board to clarify the term.

The Court held that the benefit of tax exemption provided in Section 10 (26AAA) shall be extended to all Sikkimese people irrespective of old or new settlers.

As a result of being violative of Articles 14, 15, and 21 of the Indian Constitution, the proviso to Section 10 (26AAA), which stated that "a Sikkimese women who marries a non-Sikkimese man after 1 st April 2008," was declared unconstitutional.

In India, the Income Tax Act is the main legislation that specifies how income tax is to be calculated, collected, and paid. The act has been amended multiple times. Those modifications were implemented to modernise the law in the evolving economic and social circumstances, close loopholes in the tax code, expedite the tax filing process, and add new incentives and reductions.

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