Joint taxation of married couples in India: Will Budget 2025 follow the US and UK model?

 

Ahead of Budget 2025, the Institute of Chartered Accountants of India (ICAI) has suggested the government to allow joint taxation of married couples.

Joint taxation for married couples is practised in developed countries like the USA and the UK. In this system, a married couple is treated as a single taxable unit, allowing them to combine their incomes for tax filing.

Although the ICAI's proposal has sparked discussions about the need for joint taxation rules for spouses in India, tax experts believe such a change is unlikely in the upcoming budget.

"While joint taxation will be a beneficial move, the government may take time to introduce such a scheme as it would require the introduction of a completely new regime with different slabs and rates, deductions, exemptions, surcharges, etc. Hence, it is uncertain if such a scheme will be introduced in the upcoming budget," says SR Patnaik, partner, and head of taxation at Cyril Amarchand Mangaldas, a law firm.

Further experts believe that implementing joint tax filing for married couples in a country like India would require careful consideration.

"In some cases, it could lead to unintended consequences, such as the income of women or lower-earning spouses being unfairly controlled or claimed by the higher-earning spouse under the guise of joint filing. This could reinforce existing inequalities and undermine the financial independence of women," says Ankit Jain, partner, Ved Jain and Associates, a chartered accountancy firm.

However, tax experts agree that having such a system would benefit families, especially those dependent on single-earning members.

"If the government implements a joint taxation scheme, married couples would be able to combine their incomes and file a single tax return. This could lead to a more equitable tax burden, especially for households where one partner earns significantly less," says CA Dr Suresh Surana.

He further says that ICAI's recommendation for joint taxation reflects a growing recognition of the need for a more equitable and simplified tax structure for married couples in India.

"Adopting a similar system in India would align the country with global trends, providing significant relief to families, particularly those with single-income earners," Dr Surana adds.
What is the current tax system for married couples in India?

Married couples in India file their taxes individually, with no provision for joint filing. This leads to higher tax liabilities, especially when one spouse earns significantly more than the other.

The current system helps families with dual incomes, where both spouses are earning and filing their tax returns, as they can separately claim tax deductions and exemptions. However, families dependent on the income of a single member fail to enjoy such benefits.

In contrast, countries like the USA allow couples to file jointly, which results in lower overall tax burdens due to combined income and access to additional deductions and credits.
How can joint taxation help?

"Joint taxation could increase disposable income, reduce the tax burden, and encourage greater compliance and transparency in tax filings. If implemented in Budget 2025, such a rule could provide significant financial relief to taxpayers, promote savings and investments, and enhance compliance by simplifying the filing process," says Dr Surana.

According to Jain, joint filing of returns would allow married couples to leverage slab benefits for both. For instance, if a taxpayer earns ₹13 lakh and their spouse earns ₹50,000, the taxpayer might currently pay ₹75,000 as tax under the individual filing system, while the spouse pays none.

However, under joint filing, the combined income of ₹13.5 lakh could fall below a combined tax-free threshold (e.g. ₹14 lakh if both are eligible for ₹7 lakh tax-free income), resulting in significant tax savings, says Jain.

Patnaik says joint taxation would allow families to plan taxes efficiently while reducing their overall tax liability. “This would come as a major relief for a majority of Indian families where the entire family is dependent on the income of a single earning member. Further, a joint return would also reduce tax filing and compliance burden on a family," he says.

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