प्रधान मुख्य आयकर आयुक्त /Principal Chief Commissioner Of Income Tax
पूर्वोत्तर क्षेत्र गुवाहाटी /North East Region Guwahati

Awareness Campaign

North East Region (NER) of India covers 7 states spread over a large geographical area (2.55 lakh sq.km), which is poorly connected and sparsely populated (176 persons per sq.km, against all-India average of 382 persons per sq.km). While India has 2.4% of the world surface area and 17.5% of the world’s population, NER has 7.8% of India’s surface area and 3.7% of India’s population. The region has higher than all-India average of literacy rate, sex ratio, and population growth rates. The region is strategically critical, having huge land-borders with China, Bangladesh, Myanmar and Bhutan. (Data as per Census of India 2011.)

Government of India have since 1990s adopted a ‘Look-East’ policy under which there is considerable development focus on NER. The region’s population is growing at a rapid rate. Connectivity, both transport and communication, is expanding rapidly. The look- east policy has seen special impetus in the last 4-5 years, wherein a slew of projects and institutions have been announced and are being set up in NER. These activities are likely to rapidly increase local incomes and expand the tax base. These developments need adequate and calibrated response from the department.

Nearly 30% of the population of this area are scheduled tribes, who have been exempted u/s 10(26) of the Act from paying taxes on any income arising / accruing from any source in the scheduled areas / states, and entire income from dividend or interest on securities. Income other than these exempt incomes, such as accruing or arising from sources outside scheduled areas, is chargeable to tax. However, the general sense that prevails among tribal persons in the region is that they are completely outside the tax net. Tribal people do not respond to letters / notices / summons from the department. Those who respond object to the letters / notices / summons issued to them on the ground that they are exempt from income tax. There are businesses, investments and purchase of properties by tribal persons from NER in cities like Guwahati, Delhi, Mumbai, Bengaluru, etc., that generate incomes and gains which are taxable but escape taxes as returns are not filed.

Income of non-tribal persons residing in scheduled areas is fully chargeable to tax. For non-deduction of TDS, certificate u/s 197 is mandatory, otherwise the liability of non- deduction will fall on the deductors. Income of entities other than individuals, i.e. partnership firms, association of persons, body of individuals, LLPs and companies, is fully taxable.

Further, some states in NER with predominantly tribal population do not permit ownership of property or businesses by non-tribals / outsiders unless they have a local tribal person as partner. This often results in informal arrangements, or outsiders doing businesses in the name of local persons for consideration of fixed or percentile remuneration. Such cases are likely to be hit by the law relating to benami property. The solution to reduce or stop such practices is to persuade such enterprises to formalize their partnerships or go for LLP / Corporatization.

If the three limbs of the section 10(26) of the Income Tax Act, 1961 are fulfilled namely 1) individual belonging to scheduled tribe in specified area 2) if source of income is accruing and arising from schedule area 3) if the individual is residing in the schedule area. But there is a strong general perception that all tribals are exempt from income tax which is an incorrect perception.