Budget 2025: ICAI Proposes Joint Tax Filing, How Married Couples Will Benefit From It

Ahead of the Union Budget 2025, the Institute of Chartered Accountants of India (ICAI) has proposed the introduction of joint taxation for married couples. Under joint taxation, a married couple would be treated as a single taxable unit, allowing them to combine their incomes when filing tax returns, similar to systems already in place in countries like the US and the UK.

"ICAI suggests allowing joint income tax return filing for married couples," Chartered Accountant Chirag Chauhan wrote on X (formerly Twitter). "Ideally, an individual income of Rs 7 lakh is exempt from tax; if married, the exempt limit for the family would be Rs 14 lakh."

ICAI suggests allowing joint income tax return filing for married couples. Ideally, an individual income of ₹7 lakh is exempt from tax; if married, the exempt limit for the family would be ₹14 lakh.

Will #budget2025 introduce this new concept?

— CA Chirag Chauhan (@CAChirag) January 7, 2025

What the proposal suggests

The ICAI suggests that married couples should be able to choose between filing taxes individually or together under a new joint taxation system. This system could benefit families with one income earner and help prevent tax avoidance.

The proposed tax slabs for couples filing jointly are:

Up to Rs 6 lakh: No tax
Rs 6-14 lakh: 5 per cent tax
Rs 14-20 lakh: 10 per cent tax
Rs 20-24 lakh: 15 per cent tax
Rs 24-30 lakh: 20 per cent tax
Above Rs 30 lakh: 30 per cent tax

Under the joint filing system, the basic exemption limit would be doubled to Rs 6 lakh from the current Rs 3 lakh. The ICAI also recommends raising the surcharge threshold from Rs 50 lakh to Rs 1 crore. The surcharge would apply as follows:

Rs 1 crore to Rs 2 crore: 10 per cent surcharge
Rs 2 crore to Rs 4 crore: 15 per cent surcharge
Above Rs 4 crore: 25 per cent surcharge

Both partners in a salaried couple would also benefit from the standard deduction.

Current tax system for married couples

Currently, married couples in India file taxes separately, which can lead to higher taxes when one spouse earns more than the other. The system works better for families where both partners earn, as they can each claim deductions individually.

However, single-income families miss out on these benefits. In countries like the USA, joint filing reduces the overall tax burden by combining incomes and offering extra deductions and credits.

The ICAI has also raised concerns that the current basic exemption limit is insufficient considering the cost of living. It has been suggested that families should look into shifting income to other members to reduce tax obligations.

How joint taxation system can work

By choosing joint filing, families can significantly lower their tax liability through additional deductions and more favourable tax rates compared to filing separately. This system helps reduce the overall tax burden for families.

Expert opinion

Tax experts think it is unlikely to be implemented 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," SR Patnaik, partner, and head of taxation at Cyril Amarchand Mangaldas, a law firm, told Upstox.

CA Suresh Surana explained to Business Today that ICAI's proposal is meant to help families, especially when one spouse is the main earner. He explained that people can choose between the default tax system and the regular tax rules. The basic exemption limit for individuals is Rs 2.5 lakh under the default system, but it could increase to Rs 3 lakh.