Tax Reform on the Horizon: A New Era for Married Couples in India
The Institute of Chartered Accountants of India (ICAI) has proposed a groundbreaking change to the country’s tax framework, introducing a joint taxation system for married couples. This recommendation is part of a broader review of the Income-tax Act, 1961, ahead of the Union Budget 2025.
A Shift Towards Simplification
The new system would allow couples to file taxes as a single taxable unit or individually, potentially doubling the basic exemption limit for joint filers. This move aims to alleviate the tax burden on families with a single primary earner and prevent tax avoidance.
Key Changes and Benefits
One of the significant changes under this system would be an increase in the basic exemption limit from Rs300,000 ($3,600) to Rs600,000 ($7200) for couples filing jointly. Additionally, ICAI has recommended raising the surcharge threshold from Rs5m to Rs10m, with varying surcharge rates based on income brackets. This would enable salaried couples to individually claim the standard deduction under the joint filing system.
The Current Landscape
Currently, in India, married couples are required to file taxes separately, resulting in higher tax bills for households with only one income. ICAI argues that the current basic exemption limit does not reflect the rising cost of living in India, making reforms necessary to ease the financial pressure on families.
A Broader Context
This announcement follows ICAI’s decision to postpone the enforcement of Phases III and IV of its peer review mandate. The new deadlines have been extended to 1 July 2025 for Phase III and 1 January 2026 for Phase IV, with the intention to expand the scope of the peer review process.
Expert Insights
ICAI’s proposal is a significant step towards simplifying the tax system and providing relief to married couples. By introducing a joint taxation system, India can bring its tax framework more in line with international best practices, ultimately benefiting families and promoting economic growth.
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