Section 10(26) of Income Tax Act: Tax Exemption For Scheduled Tribes in India

The Government has undertaken many initiatives to improve the socio-economic condition of scheduled tribes in India. One such initiative is the tax exemption under Section 10(26) of the Income-tax Act, 1961. 

The area where scheduled tribes reside is called a tribal area. Such areas are advised in the Fifth and the Sixth Schedule of the Constitution of India. The Sixth Schedule of the Indian Constitution outlines measures of autonomy and self-governance to the Scheduled Tribes living in the hill regions of Northeast India. It also specifies the names of the states that are eligible for tax exemption. It is important to remember that an individual of a scheduled tribe must be a permanent resident of one of the Sixth Schedule Areas to be eligible for this exemption. 

In this article, we will discuss the provisions of section 10(26) in detail and understand its implications for tribal communities. Let’s get into details of this act, its significance for scheduled tribes in India, income tax applicability, benefits, and more. 

What is section 10(26) of Income Tax Act?

Section 10(26) of the Income Tax Act, 1961 provides for tax exemption to members of Scheduled Tribes. The act allows tax exemptions to Scheduled Tribes individuals living in the Tripura, Mizoram, Manipur, Nagaland, Assam, Arunachal Pradesh, and Ladakh region of the State of Jammu and Kashmir. 

Income Tax Exemption under Section 10(26)

According to this section, any income arising or accumulating from the below sources is exempted from Income tax:

• From an income source in states or areas mentioned in Section 10(26) of the Income Tax Act.
• By way of dividends or interest on securities

Exceptions to Exemption under Section 10(26)

The exemption is not valid for the following income sources:

• Rental income from immovable property situated outside the stated areas
• Income from any business activity conducted outside the stated areas 

Applicability of Section 10(26) of Income Tax Act 

Section 10(26) of the Income Tax Act applies to the following areas:

• Part I (The North Cashar Hills District and The Karbi Anglang District) or Part II (The Chakma District, The Mara District, and The Lai District) of the Sixth Schedule to the Constitution.
• The states like Arunachal Pradesh, Mizoram, Manipur, Nagaland, and Tripura.
• The Ladakh region of Jammu and Kashmir.

If you are a member of the scheduled tribe in any of the above areas, your generated income while living there will be tax exempted.

Note: Sikkimese individuals earning from any source in Sikkim or through dividends or interest on securities are eligible for tax exemption under Section 10(26AAA).

How to claim exemption under section 10(26)?

You can claim tax exemption under Section 10(26) by filing an income tax return. Since the exemptions are income-based, you must disclose the income generated and the corresponding exemption. 

Are Members of the Scheduled Tribe Community Required to File Income Tax?

Yes, the scheduled tribes of the Northeast region of India need to file Income Tax returns if their income surpasses the threshold defined by the income tax department. They must specify the income earned and claim the exemption under sections 10(26) and 10(26AAA).

Income Tax Exemption Certificate for Scheduled Tribes in India

If a member of this tribe living in the aforementioned areas of India wants to claim an income exemption. In that case, they should provide evidence of being a member of a recognised Scheduled Tribe. For the same, they can present a certificate issued by the competent authority confirming that the individual belongs to this tribe. 

Benefits of the Exemption Under Section 10(26)

The exemption under Section 10(26) of the Income Tax Act offers multiple benefits to the members of this tribe living in specified areas. They are discussed below:

i. Financial Support:

The Indian government offers financial support to minority tribal communities by exempting income from taxation. Consequently, these members can use their income for their well-being and development. 

ii. Preserves Cultural Identity:

By offering special provisions for these members, the Indian government acknowledges and preserves their cultural identity. This ensures that they can continue living in harmony with their customs and traditions. 

iii. Fosters Economic Development:

This exemption fosters economic activities within the specified areas. Subsequently, it leads to the overall development of the region and the development of communities of this tribe. 

Conclusion

Section 10(26) of the Income Tax Act provides tax relief to members of Scheduled Tribes living in specific regions of India. Through income tax exemption, the government benefits these members with economic growth and equitable development. If these members fulfil the conditions stated under section 10(26), they can benefit from this exemption and use their income for their development and welfare.