Pre-budget suggestions are pouring in, in the North Block. As the government gears up to present the 2026 budget, one proposal stands out for its potential impact on millions of households: optional joint taxation for married couples. It has been suggested by the Institute of Chartered Accountants of India (ICAI) and if adopted by the Ministry of Finance (MoF), it could mark a significant shift in how personal income tax is structured — and how families plan their finances.What is the proposal about?Currently, under the Indian tax system, every individual — married or not — is taxed separately. Each spouse must file their own income tax return, even if they have shared income or joint expensesICAI proposes that married couples be given the option to file a single, joint return — combining their incomes and deductions — instead of two separate ones. In other words: a married couple could choose what makes financial sense for them each year — file individually, or jointly.Why ICAI recommends joint taxationAccording to ICAI’s submission:
- It simplifies tax compliance and household filing. Joint filing could reduce paperwork and make it easier for couples to manage their tax affairs together.
- It could relieve tax burden for many households — especially those with a single earning member. Under joint taxation, the exemption thresholds and effective liability could be more favourable.
- It aligns India with global practices. Many countries – such as the US and some European countries (such as Germany, Spain, Portugal) allow joint filing or joint assessment for married couples.
How joint taxation might work (proposed model)The couple would file a single consolidated Income tax return (ITR) under the joint-filing option.
- Tax slabs (for joint filers) might be restructured. For example, one proposed model sets no tax up to ₹6 lakh (for the couple), 5% for ₹6–14 lakh, and ascending slabs for higher income.
- Standard deductions (for salaried earners), exemptions and surcharge thresholds may be adjusted — e.g. increased surcharge threshold, separate standard deductions for both spouses if salaried.
- The option to choose — i.e., couples could opt to file jointly only if it benefits them; otherwise, they’d continue filing individually, retaining flexibility.
What needs careful design — and possible concernsThe idea is attractive, but implementing joint taxation in India isn’t just a technical tweak. There are challenges to consider:
- System-level overhaul required: Current tax filing, TDS/TCS, PAN-based tracking systems are designed for individuals. Joint filing may require re-designing data architecture, reconciliations, challans, and return-processing.
- Risk of revenue leakage or misuse: If exemption limits and deductions are doubled or significantly enhanced for couples, there could be a potential for tax avoidance through income-shifting, especially in households with skewed income distribution.
- Complexity with deductions & exemptions: Handling categories like house-property income, home-loan interest, investments under 80C, medical insurance deduction, etc., for two individuals in one return would require clear guidelines — especially because current laws treat individuals separately.
- Fairness to dual-income couples: For couples where both work, joint taxation may not offer much advantage — or could even increase tax liability if their combined income pushes them into higher slabs. The optional nature would allow couples to choose the regime that’s most beneficial.
What could this mean for Indian households — a few scenarios
Why this proposal matters — beyond tax savings
- It recognises a household as a unit — acknowledging that many expenses (household, children, assets) are shared, so taxing couples as a unit can make tax treatment more equitable.
- It simplifies tax compliance — fewer returns to file, less paperwork, consolidated records, which is especially beneficial for small earners or nuclear families.
- It aligns India with global practices — many economies allow joint filing, and this could modernise India’s tax code for contemporary family structures.
- It could increase compliance and reduce evasion — by discouraging income splitting and spreading income artificially across family members to reduce taxes.
ConclusionThe proposal for optional joint taxation of married couples — as submitted by ICAI in its pre-Budget 2026-27 memorandum — represents a potential paradigm shift in India’s personal tax framework. It seeks not just to ease compliance, but to recognise households (not just individuals) as fundamental economic units.For many Indian families — especially those with a single earner, homemaker spouse, children, home-loan or shared expenses — this could translate into lighter tax burden, improved financial well-being, and simpler tax compliance. On the policy side, it could bring India a step closer to global practices and make the tax system more equitable, transparent, and modern.
