Previous Year Question

The correct answer is the Kelkar Committee.

In 2002, two Task Forces were constituted for the simplification and rationalisation of direct and indirect taxes under the chairmanship of Dr. Vijay L. Kelkar. The Direct Taxes Task Force examined personal income tax, exemptions, tax administration and the broader tax structure. Its final report was submitted in December 2002.

The recommendation to eliminate the tax incentives/rebate available under Section 88 of the Income-tax Act was associated with this Direct Taxes reform framework.

The old Section 88 primarily dealt with income-tax rebate on items such as life insurance premium, provident fund contributions and specified savings/investments. Conceptually, this differed from a deduction from taxable income because it operated as a rebate from the tax payable, subject to the conditions then applicable.

It is useful to distinguish the committees. The Raja J. Chelliah Committee was associated with the earlier phase of tax reforms in the 1990s, whereas the specific Section 88 reform tested in this question is associated with the Vijay Kelkar-led Direct Taxes Task Force.

Current Status

The Section 88 tax-rebate framework was effectively sunset by the Finance Act, 2005, with a deduction-based framework being introduced for specified savings. The redundant Section 88 was subsequently formally omitted by the Finance Act, 2023 with effect from 1 April 2023.

The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961.

The sequence can be remembered as—

2002 → Kelkar Direct Taxes Task Force
2005 → Section 88 rebate framework sunset; alternative deduction framework introduced
2023 → Section 88 formally omitted from the 1961 Act
1 April 2026 → Income-tax Act, 2025 came into force