Income Tax applicability on North Eastern States

This document covers

1. Impact of Income on individuals from North eastern States
2. Income of Member of a Scheduled Tribe
3. Specified Income of a Sikkimese individual
4. Taxability of Stock Market Transactions
5. Are the above persons required to file Income Tax?

1. Impact of Income on individuals from North eastern States

Northeast India is the eastern most region of India. It consists of 8 states i.e., Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, and Sikkim. However Northeast India lags behind the rest of the India due to certain issues. The Income Tax Act, 1961 provides certain exemptions and deductions to the people living and operating in North East India.

2. Income of Member of a Scheduled Tribe (Section 10(26)

Income Tax Act 1961 provides for exemption of Income of member of a scheduled tribe u/s 10(26). As per section 10(26), the following income is exempted from Income tax.

Any income arising or accruing

1. from any source in areas or states as mentioned below
2. by way of dividend or interest on securities

for a member of scheduled tribe residing in

1. Any area specified in the constitution i.e., The North Cachar Hills District, The Karbi Anglong district, The Bodoland territorial Areas District, Khasi Hills District (Meghalaya), Jaintia Hills District(Meghalaya) or the Garo Hills District (Meghalaya) or
2. In the states of Manipur, Tripura, Arunachal Pradesh, Mizoram and Nagaland or Ladakh Is exempt from tax u/s 10(26) of Income Tax Act

NOTE : According to Article 366 (25) of the Constitution of India, the term "Scheduled Tribes" refers to tribal communities or tribes that are designated as such in accordance with Article 342 of the Constitution.

The Constitution remains ambiguous regarding the specific criteria that determine whether a community qualifies as a Scheduled Tribe. The terminology and expression "tribes or tribal communities or groups within tribes or tribal communities" as used in Article 342 must be interpreted in light of their historical status as underdeveloped societies. Due to their primitivism, geographical isolation, timidity, and social, educational, and economic backwardness, Scheduled Tribe communities in our country are distinguished from other communities by these characteristics.

3. Specified Income of a Sikkimese individual (Sec 10(26AAA))

The following income which accrues or arises to a Sikkimese individual will be exempt from Income tax

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

4. Taxability of Stock Market Transactions

If the members of scheduled Tribe or Sikkimese individual is having the income from gains from stock market like capital gains, F&O, intraday etc, they are required to pay Income Tax on those transactions. There is no exemption u/s 10(26) or 10(26AAA)

5. Are the above persons required to file Income Tax?

Yes, the above persons are required to file Income Tax if their income exceeds the threshold prescribed by the income tax department. They need to file income tax return, show the income earned and claim the exemption u/s 10(26) and 10(26AAA).