History of Section 88B :

Rebate of Income Tax in case of individual of 65 years and above. Section 88-B of the Finance Act, 1992 was introduced from 1^st April, 1993 and was later amended by Finance Acts and allowed an individual resident in India who completed age of 65 years or more at any time during the previous year can get rebate of 40% of tax provided his gross total income does not exceed one lac twenty thousand rupees. The above concession was only available to senior citizens who have completed 65 years upto income of Rs.1,20,000 upto 31st March, 1998.

Section 88-B was substituted by Finance Act, 1997 with effect from 1-4-1998 (Assessment Year 1998-1999) which reads as under:

88-B Rebate of Income Tax in case of Individual of sixty five years of age.

An assessee, being an individual resident in India, who is of the age of sixty-five years or more at any time during the previous year shall be entitled to a deduction from the amount of Income-Tax (as computed before allowing the deductions under this chapter) on his total income, with which he is chargeable for any assessment year, or an amount equal to hundred percent of such income-tax or an amount of ten thousand rupees whichever is less."

For the assessment year 1998-1999 irrespective of Income, a senior citizen was getting maximum rebate of income upto Rs.10,000/-. Section 88-B was again amended by Finance Act, 2000 with effect from 1st April 2001 (assessment year 2001-2002) and rebate of income-tax was raised to Rs.15,000 from Rs.10,000 and it has been continued even for assessment year 2002-2003. For Assessment Year 2004-2005 rebate of income-tax of Rs.20,000/- is allowed to senior citizen.

The Senior Citizen on availing tax deduction and tax rebate under Section 80L, 88 and 88B can avoid to pay income tax on income of Rs.1,86,000. Following illustration explains how above provisions can help senior citizens from payment of tax upto limit of income of Rs.2,50,000.

Example :

Mr. X, a Senior Citizen has following income:

For assessment year 2004-2005, he can get rebate of Rs.20,000 in payment of Income-Tax.

There are about 7 crores 30 lacs senior citizens in India and one crore 50 lacs senior citizens are very well placed financially. Above senior citizens consist of pensioners from Central Government, State Government, Corporation, Professionals, Businessmen and rich Agriculturists.

For assessment year 2004-2005 (1-4-2003 to 31-3-2004) a Pensioner Senior Citizen may not come in tax net even if his income is more than 2 lacs after taking advantage of standard deduction 80L, 88, 88B of Income Tax.

Exemption limit of a single man in U.S.A. is $7450 and senior citizen limit is $8550.

There is only difference of 900 $ in U.S.A. with regard to exemption limit of ordinary tax payer and senior citizen. The exemption limit for a Senior Citizen can be Rs.1,20,000/- instead of Rs.60,000/- suggested for a citizen in this book.

Effect of Deletion of Section 88B :

The Central Government can have additional income of Rs.3000 Crore from Senior Citizens if exemption limit is kept at Rs.1,20,000/- and also on deletion of sections 80L, 88 and 88B of Income Tax Act.