Union Budget 2025: The Institute of Chartered Accountants of India (ICAI) has suggested to the Centre in its pre-budget memorandum that in the upcoming Budget 2025, married couples should be permitted to jointly file their income tax returns (ITRs) under the New Tax Regime. According to ICAI, implementing a joint taxation scheme will benefit families with sole breadwinners and discourage tax evasion.
"It is suggested to introduce an option for joint taxation of married couples by filing a joint return of income. Individuals may be given an option to pay tax under the Joint Taxation Scheme," the ICAI said.
"They can choose to pay tax individually under the present scheme of taxation or opt for joint taxation of self and spouse," it added.
Key points in the proposal
The implementation of a joint taxation scheme is beneficial for families with single-earning members and helps to prevent tax avoidance. Individuals may have the option to pay taxes under the Joint Taxation Scheme.
They can choose to pay taxes individually under the current taxation system or opt for joint taxation with their spouse.
Proposed joint tax slabs include:
The basic exemption limit under joint filing is set at Rs 6 lakh, which is double the current limit.
The ICAI has recommended increasing the surcharge threshold limit from Rs 50 lakh to Rs 1 crore. Standard deduction will be available for both partners if they are salaried employees.
Additionally, the threshold for the surcharge would be increased, with specific rates applied to income beyond Rs 1 crore, as follows:
· Rs 1 crore to Rs. 2 crore – 10% surcharge
· Rs. 2 crore to Rs. 4 crore – 15% surcharge
· Above Rs. 4 crore – 25% surcharge
The joint taxation filing has been a point of discussion on social media platforms.
Current tax slabs
The new tax regime is set as the default option for ITR filing, with taxpayers having the option to choose the old tax regime if they prefer. Both regimes feature different tax slabs, with rates increasing as income levels rise. The basic exemption limits are ₹3 lakh/year for the new regime and Rs 2.5 lakh/year for the old regime, meaning taxpayers do not owe any tax on incomes up to Rs 3 lakh/year under the new regime and Rs 2.5 lakh/year under the old regime.
The ICAI has expressed concerns that the current basic exemption limit may not be sufficient given the cost of living. Consequently, it advises exploring methods to shift income to other family members in order to minimise tax obligations.
How this proposal can work
The idea of joint taxation for married couples is not a new one and is already implemented in several developed countries, providing a potential model for India to consider. In the United States, married couples have the option to file their taxes jointly, which comes with various advantages such as higher exemption limits and wider tax brackets.
By choosing to file jointly, families can significantly reduce their tax burden by benefiting from increased deductions and more favourable tax rates compared to filing separately. Similarly, countries like the United Kingdom also allow married couples to file their income taxes jointly, recognizing the shared financial responsibilities within households.
"ICAI's proposal seeks to address the increasing economic pressures faced by families, particularly where any of the spouses is the main earning member in the household. Currently, individuals can either opt for the default tax regime under Section 115BAC or choose the normal provisions for taxation. In addition, the basic exemption limit under the default scheme is Rs 2.5 lakh for an individual taxpayer, and under the new/ default regime, this can go up to Rs. 3 lakh. Married couples, particularly those with two earning members, can benefit from the exemption limit for each member separately," Dr Suresh Surana told Business Today.
However, a significant proportion of families in India are supported by a single earning member, making the current exemption limits inadequate when considering the rising cost of living. The existing tax exemptions, even for a family of four (husband, wife, and two children), remain low, often prompting tax avoidance mechanisms through income splitting among family members.
Dr Surana added: "For salaried individuals, the standard deduction under Section 16(ia) should be separately available for both the husband and wife. Moreover, the proposal suggests proportionally increasing the adjusted total income limit for the non-applicability of Alternate Minimum Tax (AMT) under Section 115JC, which currently stands at Rs 20 lakh, for couples opting out of the default tax regime, i.e. the New Tax Regime."
Impact of joint taxation
Proposing a joint taxation system could yield substantial advantages, particularly for households with a sole breadwinner. By implementing a higher exemption threshold, this approach would accurately represent the financial dynamics of such families and offer potential relief from tax obligations. Moreover, it may promote enhanced tax compliance and fairness among married couples, while supporting the adoption of tax planning strategies that are in line with contemporary family models.
"By introducing the joint taxation system, India would align itself with global trends of supporting families through more flexible tax structures. Such a system would not only ease the financial burden on single-income households but also increase compliance and transparency in personal tax filings. However, such a proposal would require substantial changes to the current income tax framework, including updates to how deductions, exemptions, and surcharges are applied for married couples. As we approach Budget 2025, it remains to be seen whether this recommendation will be accepted and incorporated into the tax reforms, as it would mark a significant shift in the way the government approaches family-based taxation," Dr Surana added.