The Institute of Chartered Accountants of India (ICAI) has recommended to the government that married couples be allowed to jointly file their income tax returns (ITRs) under the New Tax Regime in the upcoming Budget 2025. This proposal aims to ease the tax burden on families with a single earning member and curb tax evasion.
In its pre-budget memorandum, the ICAI suggested introducing a joint taxation scheme, where couples could choose to file their taxes together or continue with the current individual taxation system. The idea is to provide more tax relief to households where only one spouse is the primary breadwinner.
Proposed Tax Slabs Under Joint Taxation
Under the proposed scheme, the tax slabs for married couples filing jointly would be as follows:
- Up to Rs 6 lakh: No tax
- Rs 6-14 lakh: 5%
- Rs 14-20 lakh: 10%
- Rs 20-24 lakh: 15%
- Rs 24-30 lakh: 20%
- Above Rs 30 lakh: 30%
The basic exemption limit for joint filing would be set at Rs 6 lakh, double the current individual limit.
Surcharge Adjustments and Standard Deduction
The ICAI also recommended increasing the surcharge threshold from Rs 50 lakh to Rs 1 crore. Additionally, salaried individuals could benefit from a standard deduction for both partners if they are employed. For higher income levels, the surcharge would be applied 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
ICAI’s Concerns on Current Tax Regime
The ICAI expressed concerns that the current tax exemptions, especially for single-income households, are inadequate given the rising cost of living. The current basic exemption limit under the New Tax Regime is Rs 3 lakh, but this may not be sufficient for many families. The ICAI’s proposal to allow joint taxation aims to address this issue by enabling income splitting between spouses, thereby reducing the overall tax liability.
Global Examples of Joint Taxation
The idea of joint taxation is not new and is already in practice in several developed countries. In the United States, married couples can file jointly, benefiting from higher exemption limits and more favorable tax brackets. Similarly, the United Kingdom allows joint filing for married couples, recognizing the shared financial responsibilities within households.
Impact on Families with Single Earning Members
ICAI’s proposal is particularly aimed at families with one primary earner. Dr. Suresh Surana, an expert in taxation, highlighted that the current tax exemptions for a family of four, including a husband, wife, and two children, are often too low. This has led to tax avoidance strategies, such as income splitting, to minimize tax obligations.
Dr. Surana also suggested that the standard deduction under Section 16(ia) should be available separately for both partners if they are salaried employees. Furthermore, the proposal recommends increasing the adjusted total income limit for the non-applicability of Alternate Minimum Tax (AMT) under Section 115JC for couples opting out of the New Tax Regime.
Potential Benefits of Joint Taxation
The joint taxation system could provide significant relief for households with a sole breadwinner by offering a higher exemption threshold. This would reflect the financial dynamics of such families more accurately and reduce their tax burden. The scheme could also encourage better tax compliance and fairness among married couples.
Looking Ahead to Budget 2025
The proposal to introduce joint taxation for married couples aligns with global trends of offering more flexible tax structures for families. It could ease the financial pressure on single-income households and promote transparency in personal tax filings. However, the implementation of this system would require significant changes to the current income tax framework, including adjustments to deductions, exemptions, and surcharges for married couples.
As the government prepares for Budget 2025, it remains to be seen whether this recommendation will be accepted and incorporated into the tax reforms. If adopted, it would represent a major shift in how India approaches family-based taxation.
