For couples, especially those with one primary earner, it allows unused exemptions from the non-earning spouse to be utilized, potentially reducing overall tax liability. Dual-income families could also see advantages through consolidated slabs, making the process more user-friendly

The Institute of Chartered Accountants of India (ICAI) has put forward a significant proposal in its pre-budget submission to the Finance Ministry: an optional joint taxation system for married couples. Under the current tax regime, individuals are taxed separately, with basic exemption limits set at Rs 4 lakh in the default system and Rs 2.5 lakh in the optional regime. This structure suits dual-income families well, but many households depend on a single earner. ICAI highlights that the existing setup often leads to income shifting among family members to maximize exemptions, a practice that could be curbed through a voluntary joint taxation option.

This would simplify tax planning for households and promote greater compliance. In a detailed breakdown, the proposal aims to treat married couples as a single unit for tax purposes, combining their incomes and liabilities under one umbrella. This "couple tax" concept, inspired by systems in countries like the United States and Germany, could benefit both the government and taxpayers. For the government, it streamlines administration and combats tax evasion amid ongoing efforts against black money.

For couples, especially those with one primary earner, it allows unused exemptions from the non-earning spouse to be utilized, potentially reducing overall tax liability. For instance, surcharge thresholds might rise from Rs 50 lakh to Rs 75 lakh under joint filing. Dual-income families could also see advantages through consolidated slabs, making the process more user-friendly following the middle-class relief measures in Budget 2025, such as enhanced exemptions and simplified structures.

A section of financial  experts views the proposal as highly beneficial for couples, particularly where one spouse earns significantly more or nothing at all. By clubbing incomes, exemption limits could double—from Rs 4 lakh per person to Rs 8 lakh jointly—allowing tax-free income up to higher thresholds, potentially extending to Rs 48 lakh with lower rates as per recent budgets. They emphasizes that this aligns with the government's push to simplify taxes, reduce fake claims, and broaden the tax base by encouraging honest disclosures.

A taxation expert agrees that at the individual level, the system would reduce administrative burdens, replacing two separate returns with one. However, he cautions that this isn't a minor adjustment; it represents a major overhaul of the Income Tax Act, which is built around individual assessees. Elements like TDS, TCS, and PAN-based monitoring would need reconfiguration for joint entities. Despite these challenges, he believes it could ease tax burdens for middle-income groups and enhance financial planning, though implementation will require addressing complexities such as handling divorces, cohabitation without marriage, and dual PAN requirements.

A key debate arises around the practicality of implementation. While the proposal promises simplification, Thanga points out potential hurdles in shifting from an individual-centric system to a joint one, which could introduce administrative issues for the tax authorities. On the taxpayer side, however, it might not increase paperwork; in fact, it could streamline filing for couples. A senior financial planner adds that the government has been progressively simplifying taxes over the past few years, eliminating exemptions prone to abuse and promoting digital tools to make compliance easier. He notes that practices like fabricating income in a spouse's name to claim deductions could be minimized, fostering genuine tax adherence.

Tax literacy emerges as a recurring concern, especially for young professionals navigating deductions at source and return filing. A retired bureaucrat from Finance Ministry argues that while awareness is improving, more education is needed to ensure seamless adoption of such reforms. He highlights recent simplifications in tax forms that have made it easier for salaried individuals to file without chartered accountants. He stresses that literacy levels are rising positively, but further efforts are essential to empower the younger generation, who are increasingly tax-compliant yet often reliant on professionals.

Beyond technicalities, the taxation expert raised a thought-provoking debate on societal impacts: Could joint taxation reinforce traditional gender roles? In India, where secondary earners—often women—face workforce barriers, this system might impose a "secondary earner penalty," discouraging additional income due to progressive tax slabs on combined earnings. This aspect warrants separate examination to ensure the reform promotes equity rather than hindering women's economic participation.

Overall, the proposal signals a welcome evolution toward taxpayer-friendly policies, building on Budget 2025's middle-class bonanzas. While debates on implementation, literacy, and unintended social effects persist, experts agree it could significantly reduce burdens and enhance compliance if executed thoughtfully. As Budget 2026 approaches, stakeholders await whether this voluntary option will be incorporated, potentially transforming household tax dynamics across India.