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TAX CREDIT FOR SENIOR CITIZENS

Contents
1	Assessment Year 1998-1999
2	Assessment Year 1999-2000
3	Assessment Year 2000-2001
4	Assessment Year 2002-2003
5	Special Exemption for Senior Citizens from 'One by Six Scheme'

The Finance Minister showed its concern regarding persons aged 65 years or more (popularly referred to as Senior Citizens) while presenting the budget for the year 1992-93 where he has said:

"Taking note of the financial difficulties often encountered by persons in old age and as a token of my regard for such senior citizens, I propose to give a tax rebate of 10 per cent on the net tax payable by persons who have completed 65 years of age and whose gross total income is below Rs. 50,000."

To implement the directive of the Finance Minister regarding senior citizens, a new section 88B was inserted in the Income-Tax Act by the Finance Act, 1992 operative from the assessment year 1993-94 to provide for a special tax relief in the form of additional rebate of 10 per cent. The benefit of lesser tax is available in the case of a resident individual (he may be an ordinary resident or resident but not ordinarily resident) irrespective of the fact whether he is an Indian citizen or a foreign citizen. The only condition to be satisfied is that he should have attained the age of 65 years at any time during the relevant pervious year.

The rate of rebate and the income ceiling have undergone changes since these were introduced and the present position regarding relief to senior citizens is as under:

Asst. year	Rate at which Rebate is allowable	Income ceiling i.e. income over which rebate would not he admissible (Rs.)
1993-94	10 per cent	50,000
1994-95	20 per cent	75,000
1995-96 and 1996-97	40 per cent	1,00,000
1997-98	40 per cent	1,20,000
1998-99 to 1999-2000	The amount of income-tax before giving any rebate u/s 88, 88B and 89(1); or Rs. 10,000/- whichever is less	No income limit has been prescribed
2001-2002	---	---
2002-2003	The limit of Rs. 10.000/- at (b) above Stands raised to Rs. 15,000/- for these years	-(do)-

Thus there had been progressive increases in such relief ever since these were introduced and this indicates the concern which the Government attaches to the welfare of such persons. The rebate is available to a person whether he is a pensioner, a self employed person or a trader. The main qualification for getting this relief is age i.e. 65 years or more. The working for some years concerning this relief is explained with the help of the following illustrations.

Assessment Year 1998-1999

I. A is of 67 years of age and derives income from business. The particulars concerning his income and expenditure for the financial year 1997-98 are as under :

Particulars	Rs.	Rs.
Business income		95,000
Income from other sources		25,000
		----------
Gross total Income		1,20,000
		----------
Life insurance premium paid	4,000
Mediclaim insurance premium paid	3,000
Contribution to public provident fund	12,000

From Gross total income of Rs. 1,20,000 the following deductions shall be permissible.
B/F total income		1,20,000
Medicare insurance premium u/s 80D		3,000
		-----------
Net Income		1,17,000
Tax on net income		13,400
*Less:* Rebate on Rs. 16,000/- (PPF Contribution + LIC Premium 4000 @ 20%)		3,200
Relief admissible u/s 88B on account of being a senior citizen		10,000
		----------
		13,200
		----------
NET TAX PAYABLE		200

II. Assessee-X Age 68 years

Particulars	Rs.	Rs.
Source of income
Pension (Annual)		90,000
Salary (from the job after retirement)		60,000
Bank interest		10,000

Savings
LIC Premium	5,000
Contribution to PF	15,000
Computation of tax payable		1,60,000
Gross total income		20,000
Less : Standard deduction		----------
		1,40,000
Taxable income
Tax on Rs. 1,40,000/-		18,000
Rebate on Savings @ 20% on Rs. 20,000	4,000
Benefit u/s 88B	10,000	14,000

Net tax payable		4,000

Assessment year 1999-2000

The computation of income and admissible relief for this year would be on the same lines as for the year 1998-99.

Assessment year 2000-2001

Assessee—RKG Age 68 years

Particulars	Rs.	Rs.
Income from business		1,20,000
Royalty from books		80,000
Interest from bank		20,000
Net property income (after allowing admissible deduction under the IT Act)		12,000
		---------
Gross total income		2,32,000
		---------
*Investments:*
Public Provident Fund	36,000
LIC Premium	6,000
Purchase of National Savings
Certificate 8^th issue	30,000
	--------
	72,000
Calculation of tax liability
Total income as above		2,32,000
Less: Deduction u/s 80L		12,000
Taxable Income		2,20,000
Tax on Rs. 2,20,000/-
On Rs. 1,50,000		19,000
On balance Rs. 70.000/- @ 30%		21,000
		----------
		40,000
*Less:* Credit for tax u/s 88 at the rate of 25% (tax payer being an author and the royalty income received being more than 25% of the total income) on Rs. 72,000/-		18,000
Net tax after tax credit u/s 88		22,000
Surcharge @ 17% (since total income is above Rs. 1,50,000)		3,740
		----------
		25,740
*Less:* Senior citizen's tax relief u/s 88B		15,000
		----------
Net tax payable on gross income of Rs. 2,32,000/-		10,740
		----------

Assessment year 2002-2003

No special benefit u/s 88B of the I.T. Act has been given by the Finance Act, 2001. Hence computation of income and income and calculation of tax for senior citizens for this assessment year would be on the same lines as for the year 2001-2002 subject to the following changes:

If the taxpayer derives income from pension/salary, he would be entitled to claim standard deduction as provided by the Finance Act, 2001 (See chapter VII infra).
Deduction u/s SOL for bank interest will get reduced to Rs. 9,000 instead of Rs. 12,000/-
If the taxpayer's income being a salaried employee/ pensioner is limited to Rs. 1 lakh tax credit u/s 88 would be at the rate of 30% of the eligible amount.
Surcharge would be payable at the rate of 2% only. If the taxable income is upto Rs. 60,000 only then no surcharge would be payable.

Special Exemption for Senior Citizens from 'One by Six Scheme':

The one-by six scheme has been introduced by the Government to widen the tax payer base.

It makes it compulsory for a person to file an income tax return if he fulfills any one of six criteria. These criteria are :

Occupation of an immovable properly of a specified floor area by ownership, tenancy or otherwise.
Ownership or lease of a motor vehicle.
Subscription to a telephone.
Foreign Travel.
Holding of a credit card not being an add-on card.
Membership of a club charging entrance fee of Rs.2,50,000 or more.

The Finance Act, 2001 provides that such a scheme will apply to all urban cities as per the Census Report of 1991.

Senior Citizens-individuals aged 65 years and above not engaged in any business or profession will not be required to file a return even if they meet the criteria on ownership of immovable property or subscription of a telephone. However, they will have to file a return under the scheme if they fulfill any of the other four criteria or house and telephone both.