Not on the Sikkim Subject Register? The Supreme Court says you're still Sikkimese.

When 'Sikkimese' Didn't Mean All Sikkim: A Tax Exemption, a Register, and a Gender Trap

For decades, families who had lived in Sikkim for generations — some since before the kingdom merged with India in 1975 — were told they weren't 'Sikkimese' enough. Not for a cultural ceremony or a land right. For income tax. The Association of Old Settlers of Sikkim, representing roughly 1% of the state's population, had watched as Parliament, in 2008, exempted 'Sikkimese' from tax under Section 10(26AAA) of the Income Tax Act. But the definition of 'Sikkimese' was locked to the Sikkim Subject Register — a list many old Indian settlers had never joined, because doing so required renouncing Indian citizenship. They were Indian citizens, living in Sikkim, paying tax, and suddenly excluded from an exemption meant for residents. The Supreme Court of India, on 13 January 2023, finally asked the question that should have been asked in 2008: what is the intelligible differentia that justifies excluding these families? The answer was none. And in the same stroke, the Court struck down a proviso that stripped a Sikkimese woman of her exemption the moment she married a non-Sikkimese man after 1 April 2008 — while imposing no such condition on Sikkimese men.

The register that became a wall

The Sikkim Subjects Regulation, 1961, was a pre-merger law that defined who was a subject of the Sikkim kingdom. When Sikkim became a state of India in 1975, the register was carried forward. But many Indian families who had settled in Sikkim before 26 April 1975 — the date of merger — never applied for Sikkim Subject status. Why would they? They were Indian citizens. To register as a Sikkim Subject, they would have had to give up that citizenship. So they stayed off the register, living in Sikkim, working, paying taxes, raising families.

In 2008, Parliament inserted Section 10(26AAA) into the Income Tax Act. It exempted from income tax any income accruing to a 'Sikkimese' — but defined the term by reference to the Sikkim Subject Register. The Explanation read: "Sikkimese" means an individual whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961. That excluded every old Indian settler who had not registered. The petitioners — the Association of Old Settlers of Sikkim and affected individuals — approached the Supreme Court under Article 32 in 2013. They argued that the exclusion was arbitrary, had no rational basis, and violated Article 14. They also challenged a proviso that disentitled any Sikkimese woman who married a non-Sikkimese man after 1 April 2008 from claiming the exemption. No such condition applied to Sikkimese men.

The twin test that broke the classification

The Court, in a judgment authored by Justice M.R. Shah, with a concurring separate opinion by Justice B.V. Nagarathna, applied the classic framework from D.S. Nakara v. Union of India (1983) 1 SCC 305. Article 14 permits classification, but only if it satisfies two conditions: there must be an intelligible differentia that distinguishes the grouped persons from those excluded, and that differentia must bear a rational nexus to the object of the statute.

The object of Section 10(26AAA) was to grant income tax exemption to residents of Sikkim — a special provision recognising the state's unique history under Article 371-F. The classification was between those on the Sikkim Subject Register and those not. But the old Indian settlers were equally resident in Sikkim before the merger. They were equally part of Sikkim's social and economic fabric. The only reason they were off the register was that they had chosen to retain Indian citizenship — a choice the law itself had forced upon them. The Court held that this differentia — registration or non-registration — had no rational nexus to the object of granting exemption to Sikkim residents. It was an arbitrary line, drawn without any principle. The Court followed State of Rajasthan v. Manohar Singhji (1954 SCR 996) and Shayara Bano v. Union of India (2017) 9 SCC 1 to hold that such a classification was manifestly baseless and fell within the embargo of Article 14.

The proviso that punished women for marrying

The proviso to Section 10(26AAA) was even more stark. It said that a Sikkimese woman who married a non-Sikkimese man after 1 April 2008 would not be entitled to the exemption. A Sikkimese man who married a non-Sikkimese woman faced no such consequence. The Court struck this down as violative of Articles 14, 15, and 21. Justice Shah observed that a woman is not a chattel and has an identity of her own; the mere factum of being married ought not to take away that identity. The Court cited G. Sekar v. Geetha & Ors. (2009) 6 SCC 99 and Anuj Garg & Ors. v. Hotel Association of India & Ors. (2008) 3 SCC 1 to reinforce that gender-based discrimination in legislation is constitutionally impermissible.

Justice Nagarathna, in her concurring opinion, noted that she would have preferred to direct the Union to amend the definition rather than directly reading in the inclusion — a subtle difference in remedial approach that may inform future debates on judicial versus legislative remedies in tax exemption cases. But on the substance, she agreed fully.

What the Court actually ordered

The operative order was clear and categorical. Both writ petitions were allowed. The exclusion of old Indian settlers from the definition of 'Sikkimese' in Section 10(26AAA) was struck down as ultra vires Article 14. All Indians permanently settled in Sikkim before 26 April 1975 are now entitled to the exemption, regardless of whether their names appear in the Sikkim Subjects Register. The proviso stripping Sikkimese women of the exemption upon marriage to a non-Sikkimese after 1 April 2008 was struck down as ultra vires Articles 14, 15, and 21. No order as to costs.

THE PLAY: If you are an old Indian settler in Sikkim who was denied the Section 10(26AAA) exemption because your name was not on the Sikkim Subject Register, you can now claim the exemption for all open assessment years. The Supreme Court has held that the register is irrelevant. The only condition is permanent residence in Sikkim before 26 April 1975.

Why this matters beyond Sikkim

This judgment is not just a tax case. It is a reminder that the Constitution does not permit Parliament to draw arbitrary lines in tax exemptions. The twin test from D.S. Nakara is alive and well. Any classification that excludes a group without a rational nexus to the object of the provision will be struck down. For CFOs and founders, this means that when you structure tax exemptions for employees or for a specific region, you must ensure that the eligibility criteria are rationally connected to the purpose of the exemption. A mere administrative convenience — like relying on an old register — will not pass constitutional muster.

For advocates, the judgment is a masterclass in how to challenge a statutory definition under Article 14. The petitioners did not argue that the exemption itself was bad. They argued that the definition of who gets the exemption was arbitrary. That is a powerful tool: you do not need to strike down the whole provision; you can strike down the classification within it.

The gender aspect is equally significant. The proviso was a textbook case of discrimination — it punished women for their marital choices while leaving men untouched. The Court's observation that a woman is not a chattel is not new, but its application to a tax exemption is. This will be cited in any challenge to provisions that strip women of statutory benefits upon marriage — whether in tax, pension, or property laws.

The bottom line

If you are an old Indian settler in Sikkim who was denied the Section 10(26AAA) exemption because your name was not on the Sikkim Subject Register, you can now claim the exemption for all open assessment years. The Supreme Court has held that the register is irrelevant. The only condition is permanent residence in Sikkim before 26 April 1975. And if you are a Sikkimese woman who lost the exemption because you married a non-Sikkimese after 1 April 2008, that condition is gone. The Court has struck it down. The Constitution does not permit the taxman to discriminate.