Haven for Retail Market Speculators, Tax Free Sikkim

There are many grey spots in the small state income tax: experts

With a population of 6.58 million, Sikkim is now home to commodity speculators thanks to its unique tax status. . In February, Sikkim-based traders' share trading on Mumbai's Multi Commodity Exchange (MCX) jumped from 0 to 5.5% a few years ago.

The number of merchants in the state as special consumers fell from 674 in February 2020 to 2,217.

 According to the data, MCX saw over $110 billion in total market volume on the platform in February, of which Sikkim's share topped $6 billion. 

In comparison, other states have a higher population with lower turnover even though there are more merchants. Bihar, for example, has 2.88 million traders, but only accounts for 1.51% of its market share. Kerala has 2.04 million traders but the market volume in the state is around 1.45%. Even Madhya Pradesh, with 4.67 million traders, accounted for just 3.2% of February's volume.

Experts identify that Sikkim likes to think of the product as it exemplifies people who need a Financial Account Requirement (PAN) to file tax returns 

More than 95% of MCX's trading volume is concentrated in crude oil, gold, silver and other non-metals, and the value discovered is mostly foreign. Thus, trades of Sikkim-based traders on MCX fulfilled forecasts. Experts added that traders from other states could use Sikkim residents as agents to do these deals.

Tax Haven for India

The ancient Kingdom of Sikkim was united with India because it retained its ancient customs and special status as provided for in Section 371(f) of the Constitution. Therefore, the state complied with its own Sikkim Income Tax Handbook of 1948, which governed tax laws. As a result, residents do not have to pay taxes on the installation.

Accordingly, under 26AAA, the income of Sikkimi individuals in the state or dividends or interest on securities elsewhere are exempt. This, combined with the exemption from PAN rules and the absence of tax returns, makes it almost impossible to analyze Sikkim's industry speculators.

However, when Sikkim's law was repealed in 2008, the federal budget was added to Section 10 (26AAA) to exempt state taxpayers. Since the old law was amended by the Indian Income Act of 1961, this section of the law protects Sikkim and special circumstances as "Sikkians" under section 371(f).

SEBI EXEMPTED PAN

Since 2008, the SEBI regulator has exempted residents of Sikkim from the need to apply PAN rules to invest in Indian markets and mutual funds. They provided guards and exchanges in Mumbai with proof of residency.

The SEBI Circular for Waiver of PAN Requirements for Individuals in Sikkim was issued in 2007 by order of the High Court of Sikkim. In September 2015, the Futures Market Commission, formerly a commodity regulator overseeing MCX, joined SEBI. Thus, the SEBI PAN Exemption Policy for Residents of Sikkim has also been developed for consumers of MCX compliant products. Experts say the PAN's loose rules now benefit Sikkim-based commodity investors, who profit from situations such as taxation due to the urgent need to recoup taxes.