Ahead of India’s Union Budget 2025, the Institute of Chartered Accountants of India (ICAI) has proposed a significant change in the tax filing system for married couples. The proposal suggests introducing joint taxation, which would allow couples to file their taxes as a single unit, combining their incomes and potentially reducing their overall tax burden.
In Short
- ICAI Proposed Joint Tax Filing for married Couples, Similar to Systems in the US & UK
- Tax Benefits: The proposal aims to increase the basic exemption limit and introduce more favorable tax slabs for joint filers.
- Current Taxation Limitations: The existing system requires married couples to file taxes separately, which may not be advantageous for single-income families.
What is the Expert Opinions? & Impact on Families?
Detailed Breakdown
Joint Tax Filing Proposal
The ICAI’s proposal advocates for a new system where married couples can choose between filing taxes individually or jointly. This approach aims to provide flexibility and could be particularly beneficial for families where one spouse is the primary income earner.
Proposed Tax Slabs
Under the joint taxation system, the proposed tax slabs are as follows:
- Up to Rs 6 lakh: No tax
- Rs 6-14 lakh: 5% tax
- Rs 14-20 lakh: 10% tax
- Rs 20-24 lakh: 15% tax
- Rs 24-30 lakh: 20% tax
- Above Rs 30 lakh: 30% tax
Additionally, the basic exemption limit would increase to Rs 6 lakh for joint filers, doubling the current limit of Rs 3 lakh, and the surcharge threshold would rise from Rs 50 lakh to Rs 1 crore.
Current Taxation Limitations
Currently, married couples in India file taxes separately, which can lead to a higher tax burden, especially when one spouse earns significantly more than the other. This system tends to favor dual-income families, as both partners can claim individual deductions. In contrast, single-income families often miss out on these benefits, leading to an unequal tax burden.
Expert Opinions
Despite the potential benefits of joint taxation, tax experts believe that its implementation may not happen in the upcoming budget. SR Patnaik, a taxation expert, notes that introducing a new tax regime with different slabs, rates, and deductions would require significant changes to the current system, making immediate implementation unlikely. CA Suresh Surana emphasizes that the proposal is designed to assist families, particularly those with one main earner, by offering an alternative to the default tax structure.
Important Details & Evidence
The ICAI’s proposal is grounded in the belief that the current basic exemption limit is inadequate given the rising cost of living in India. The suggestion to allow for income shifting between family members aims to help reduce tax liabilities effectively. By adopting joint filing, families could potentially benefit from additional deductions and more favorable tax rates.
Final Takeaways
The ICAI’s proposal for joint tax filing could represent a significant shift in how married couples manage their tax obligations in India. By allowing couples to file jointly, the system may reduce the tax burden for many families, particularly those with a single income. However, the feasibility and timing of implementing such a system remain uncertain, as experts caution that it would require substantial changes to the existing tax framework. As discussions continue, the potential impact on families and the overall tax landscape will be closely monitored.
