Budget 2025: ICAI Proposes Joint Taxation for Married Couples

The Institute of  ICAI (Chartered Accountants of India) has suggested to the Indian government that married couples should be allowed to file their income tax returns (ITRs) jointly under the New Tax Regime in the upcoming Budget 2025. This proposal aims to provide relief to families with a single earning member and reduce tax evasion.

Key Points of the Proposal

ICAI has recommended introducing an option for married couples to file their taxes jointly, allowing them the flexibility to choose between paying taxes individually or opting for joint taxation. Below are the significant aspects of the proposal:

Joint Tax Slabs

• Up to ₹6 lakh: No tax
• ₹6-14 lakh: 5% tax
• ₹14-20 lakh: 10% tax
• ₹20-24 lakh: 15% tax
• ₹24-30 lakh: 20% tax
• Above ₹30 lakh: 30% tax

Under this scheme, the basic exemption limit for joint filing is set at ₹6 lakh, which is double the current exemption limit for individual taxpayers.

Surcharge

The ICAI has recommended increasing the surcharge threshold from ₹50 lakh to ₹1 crore. The new surcharge rates would be as follows:

• ₹1 crore to ₹2 crore: 10% surcharge
• ₹2 crore to ₹4 crore: 15% surcharge
• Above ₹4 crore: 25% surcharge

Standard Deduction

The proposal also suggests that both partners, if they are salaried employees, would be eligible for the standard deduction under Section 16(ia) separately. This will ensure that both individuals can benefit from tax breaks meant for salaried employees.

How This Proposal Can Work

The idea of joint taxation for married couples is not entirely new and is already in practice in many developed countries. For example, in the United States, married couples have the choice to file taxes jointly, which comes with various advantages, such as higher exemption limits and broader 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 allow married couples to file their taxes jointly, recognising the shared financial responsibilities within households. In this case, the proposal from ICAI would not only help alleviate the financial burden on families, particularly those where one spouse is the main earning member but would also make the taxation process more efficient.

Currently, individuals in India have the option to choose between the default new tax regime or the old tax regime. The new tax regime offers a basic exemption limit of ₹3 lakh, while the old tax regime provides ₹2.5 lakh. The ICAI has pointed out that these exemption limits are too low, especially given the rising cost of living. Many families, particularly those with a single earning member, find these limits insufficient, which can lead to tax avoidance practices like income splitting among family members.

Impact of Joint Taxation

The introduction of a joint taxation system could provide considerable advantages, especially for households where only one spouse is earning. The higher exemption threshold would help better reflect the financial situation of such families and provide them with much-needed relief. By reducing the tax burden, it could also support enhanced tax compliance and fairness among married couples.

For salaried individuals, the proposal of granting the standard deduction separately to both partners would ease their financial pressures. Additionally, the introduction of joint taxation could also encourage the adoption of better tax planning strategies that align with modern family structures.

Dr Suresh Surana, a well-known tax expert, pointed out that this proposal could help align India’s tax system with global trends, where joint taxation is often a way of supporting families through more flexible tax structures. He emphasised that this would help reduce the financial strain on single-income households while also increasing compliance and transparency in tax filings.

However, such a proposal would require significant changes to the current income tax framework in India. It would involve updates on how deductions, exemptions, and surcharges are applied for married couples. Additionally, changes may also be required to handle the Alternate Minimum Tax (AMT) under Section 115JC for those opting out of the new tax regime.

As we approach Budget 2025, it remains to be seen whether this proposal will be accepted and incorporated into the tax reforms. If implemented, it would mark a major shift in the country’s approach to family-based taxation, making the system more inclusive and reflective of the economic pressures faced by modern families.

Learn more about Deloitte India Union Budget 2025-26 Report here.

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