The Institute of Chartered Accountants of India (ICAI) has suggested that married couples in India should have the option to file their taxes together, instead of separately. They made this recommendation before the 2026 Budget. ICAI says that this kind of system is already used in countries like the United States, where spouses can file a combined tax return. This could make tax filing easier and more convenient for couples.
Currently in India, taxes are filed individually, even for married couples. Sharing money or being married does not change how taxes are calculated—each person has their own limits for exemptions and deductions. Some experts believe this system doesn’t reflect modern households, where couples often combine incomes and share expenses.
At present every person gets a basic tax-free limit: ₹2.5 lakh under the old system and ₹4 lakh under the new system. This works fine if both husband and wife earn their own income. But in many families, only one spouse earns while the other has no income. This can make people try to split income between family members in tricky ways just to pay less tax.
For example: In some families, only one spouse earns money, and that income is taxed by the government—higher earnings usually mean higher taxes. To pay less tax, some families try to split the income between the working spouse and the non-working spouse. For example, if one person earns Rs 100, they might try to say that Rs 50 belongs to the working spouse and Rs 50 belongs to the non-working spouse. Since the non-working spouse has little or no other income, their tax rate is lower, so the family ends up paying less tax overall. This strategy is called income splitting, but tax authorities only allow it in certain ways, and trying to do it artificially can lead to penalties.
To solve this problem, ICAI suggested that married couples should have the option to file taxes together as one unit. Under this system, couples can choose between two options: they can continue to pay tax individually, as is done under the current system, or they can opt for a joint taxation scheme, where their incomes are combined and taxed together. This approach could make tax planning simpler and potentially fairer for families.
ICAI’s suggestion for new tax limits under joint filing:
ICAI has suggested new rules for married couples who choose joint tax filing:
-
If the couple’s combined income is up to ₹8 lakh, they would not have to pay any tax.
-
If their income is higher than that, it would be taxed in slabs, just like regular income tax, with the highest tax rate being 30% for combined income above ₹48 lakh.
Surcharge on joint income: A surcharge is an extra tax that high earners have to pay. Right now, singles have to pay it if they earn more than ₹50 lakh. ICAI suggests raising this limit so singles only pay the surcharge if they earn more than ₹75 lakh. For couples who choose the joint taxation scheme, the surcharge would apply only if their combined income exceeds ₹1.5 crore. This change would make the extra tax apply to fewer people and reduce the burden on high-earning families.
Benefits of joint taxation:
-
Right now, if one spouse doesn’t earn, their tax exemption and lower tax rates are wasted.
-
Joint filing would combine incomes and average them between spouses, which can lower the total tax the family pays.
-
It makes household financial planning easier and can reduce tax evasion or disputes.
-
Retired couples could benefit because pensions and investment income would be taxed more smoothly.
-
Families where only one person earns would get a higher exemption, so they pay less tax.
-
Overall, it simplifies the tax system and stops people from trying to artificially split income to pay less tax.
Potential Drawbacks of joint taxation:
If both spouses earn a high income, combining their incomes could push the total into a higher tax bracket. This means the family might end up paying more tax under joint filing. So, joint filing doesn’t always save money; it depends on how much each spouse earns. Families need to check carefully before choosing the joint taxation option.
This proposal was suggested before the 2025 Budget, but it was not accepted. We will have to wait and see if it is included in the 2026 Budget, which will be presented on February 1, 2026.
.
