'Joint taxation much-needed relief for...': Experts weigh in on options for married couples

The 2025 Union Budget may bring about a significant change in taxation by considering the implementation of a joint taxation system for married couples. The Institute of Chartered Accountants of India (ICAI) has suggested that couples be allowed to file income tax returns (ITRs) jointly under the New Tax Regime, offering support to families with single earners and promoting improved tax adherence.

This proposed system, widely practiced in developed countries such as the United States and the United Kingdom, has the potential to reduce financial burdens and streamline tax planning for Indian households. 

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The ICAI, in its Pre-Budget Memorandum 2025, has recommended the inclusion of a provision allowing married couples to file joint income tax returns. This proposal aims to alleviate the financial pressures faced by families due to the rising cost of living.

Currently, individuals have the option to either follow the default tax regime under Section 115BAC or select the standard provisions for taxation. Furthermore, the basic exemption limit under the default scheme is set at Rs 2.5 lakh for an individual taxpayer, whereas under the new/default regime, it can be increased to Rs 3 lakh. Married couples, where both partners are earning members, stand to benefit from the individual exemption limit for each member separately.

The current exemption limits in India prove to be insufficient for many families, as a large number of households rely on a sole breadwinner. This trend is exacerbated by the increasing cost of living. Even for a nuclear family of four individuals (comprising of a husband, wife, and two children), the existing tax exemptions fall short, leading to strategies for tax avoidance such as income splitting among family members.

Key points in the proposal

The ICAI's recommendations propose a revised set of tax slabs for joint filing, with no tax on income up to Rs 6 lakh, 5% for Rs 6–14 lakh, 10% for Rs 14–20 lakh, 15% for Rs 20–24 lakh, 20% for Rs 24–30 lakh, and 30% for income above Rs 30 lakh.

Under this proposal, the basic exemption limit for couples would increase to Rs 6 lakh, doubling the current limit for individual taxpayers in the New Tax Regime.

Salaried couples would benefit from individual standard deductions, while the surcharge threshold is suggested to rise from Rs 50 lakh to Rs 1 crore, with progressive surcharge rates applicable to higher income brackets.

Taxable Income Range (in Rs) | Tax Rate (%)
---------------------------- | ----------
Up to 6,00,000                | Nil
6,00,001 to 14,00,000         | 5%
14,00,001 to 20,00,000        | 10%
20,00,001 to 24,00,000        | 15%
24,00,001 to 30,00,000        | 20%
Above 30,00,000               | 30%
In addition, a surcharge will be applied to incomes exceeding 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 

"Joint taxation could provide much-needed relief to single-earner families through higher deductions and relaxed tax slabs. However, this proposal requires a thorough evaluation of its impact on tax revenues and significant adjustments to the existing tax framework. It could also lead to dissatisfaction among joint earners, who contribute equally to family needs and the nation’s GDP but may not receive comparable tax benefits," said Sudhir Kaushik, Co-Founder & CEO of Taxspanner.

How can this be beneficial?

The proposed recommendation is to allow salaried individuals to claim the standard deduction under Section 16 (IA) separately for both the husband and wife. Additionally, it suggests increasing the adjusted total income limit for the non-applicability of Alternate Minimum Tax (AMT) under Section 115JC for couples who choose to opt out of the default tax regime. Currently set at Rs 20 lakh, this limit would be adjusted proportionally.

"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.

"Given the existing exemption of up to Rs 7 lakh per individual, the current tax structure appears adequate to balance limited taxpayers and the need for economic growth. With Budget 2025 on the horizon, implementing joint taxation would mark a major shift in policy, but it demands careful consideration to ensure fairness and fiscal sustainability," Kaushik added.  

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."

The implementation of a joint taxation system in India would bring the country in line with international practices that prioritize family support through adaptable tax structures. This system would alleviate financial strain on single-earner households while enhancing compliance and transparency in individual tax declarations. However, the proposal entails significant adjustments to the existing income tax framework, necessitating revisions to deduction, exemption, and surcharge protocols for married couples.