Section 10 (26AAA) of the IT Act 1961

Section 10 (26AAA) of the IT Act 1961

Subject :Economy

Section: Fiscal Policy

Concept :

• On January 13, the Supreme Court held that the benefit of tax exemption provided in Section 10 (26AAA) shall be extended to all Sikkimese people. (Association of Old Settlers of Sikkim vs Union of India)
• Before this judgment, the tax exemption excluded “old Indian settlers”, who had permanently settled in Sikkim before the merger of the state into the Indian union on April 26, 1975, even if their names were recorded in the register maintained under the Sikkim Subjects Regulations, 1961, read with the Sikkim Subject Rules, 1961 (also referred to as the “Register of Sikkim Subjects”).
• Also, the court struck down the provision (an article or clause that introduces a condition) to Section 10 (26AAA), which excluded Sikkimese women who had married non-Sikkimese men after April 1, 2008, from the benefit of tax exemption, as violative of Articles 14, 15, and 21 of the Constitution.
• The SC verdict extended the benefit of income-tax exemption beyond the categories of Sikkimese defined in the Explanation to Section 10 (26AAA).

Section 10 (26AAA)

• This section describes the income that does not form a part of the total income while calculating the tax for an individual, also known as “exempted income”.
• Under the Explanation to Section 10 (26AAA), the definition of ‘Sikkimese’ is confined to

(i) individuals “whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961, immediately before the 26th day of April 1975;

(ii) the 73,000-odd individuals whose names were included in the Register of Sikkim Subjects by virtue of Government of India Orders of August 1990 and April 1991; and

(iii) “any 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 register”.

• Section 10 (26AAA) was inserted into the IT Act, 1961 by the Finance Act, 2008 with retrospective effect from April 1, 1990, the date on which the IT Act was made applicable in Sikkim.