As conversations around Union Budget 2026-27 gather momentum, one proposal keeps resurfacing in tax circles and middle-class dinner-table debates: allowing married couples to file a joint income-tax return in India—optionally. The idea, recommended by the Institute of Chartered Accountants of India (ICAI) as part of its pre-Budget submissions, is being positioned as a potential “game changer” for households where one spouse is the primary earner. [1]
But what does “optional joint taxation” actually mean in practice? Who could benefit, who might not—and what would the government need to redesign in India’s tax and compliance systems to make this work without creating new loopholes?
Here’s a detailed, reader-friendly explainer based on what has been reported so far, what ICAI has indicated publicly, and how joint filing works in other major tax systems.
What is “optional joint taxation” and why is it being discussed for Budget 2026?
India’s personal income tax is currently built around the individual as the tax unit: even after marriage, each spouse is assessed separately and typically files a separate return (unless one spouse has no filing requirement). [2]
ICAI’s proposal would introduce a choice:
- A married couple could continue filing individually (status quo), or
- Opt into a joint return that combines income and deductions into a consolidated filing for that year. [3]
This “optional” framing matters: it’s intended to avoid forcing couples into a single structure that may not suit everyone—especially dual-income households where combining incomes could push the couple into higher effective tax brackets. [4]
ICAI has listed “optional joint taxation of married couples” among its pre-budget suggestions for Union Budget 2026-27. [5]
The ICAI pitch: what’s on the table so far?
1) A joint return—only if both spouses have PAN
The New Indian Express reported that, under the proposed scheme, married couples would be allowed to file a joint return provided both spouses have valid Permanent Account Numbers (PANs)—and that taxpayers would retain the option to stick with individual taxation. [6]
2) Doubling thresholds and widening slabs (illustrative models vary)
Different reports describe illustrative slab structures that could be used for joint filers. The important takeaway: joint taxation would likely require a new slab framework rather than simply “adding two individual returns together.”
- The New Indian Express reported an ICAI-suggested structure where income up to ₹8 lakh (for the couple) could be tax-free, with broader slabs scaling upward and the top 30% rate applying beyond a higher threshold. [7]
- The Times of India described an example model where no tax applies up to ₹6 lakh (for the couple), with 5% from ₹6–₹14 lakh and rising slabs thereafter. [8]
These numbers are still proposals and reported models, not government policy.
3) Standard deduction and surcharge redesign could be part of the package
ICAI has also reportedly raised structural concerns about the surcharge thresholds under the default regime and suggested adjustments—especially if joint taxation were introduced.
According to The New Indian Express:
- ICAI suggested raising the surcharge threshold under the default regime (reported as at least ₹75 lakh), and
- Under a joint scheme, raising the surcharge threshold further (reported around ₹1.5 crore), with graded rates thereafter. [9]
It also suggested that if both spouses are salaried, standard deductions should be available separately. [10]
Why this proposal is gaining traction now: the post–Budget 2025 tax reset
The joint taxation debate is happening right after a major shift in the new tax regime.
In a Budget 2025-26 press release, the Government (via PIB) quoted the Finance Minister saying no income tax would be payable on income up to ₹12 lakh under the new regime (excluding special-rate income such as capital gains), and up to ₹12.75 lakh for salaried taxpayers due to the ₹75,000 standard deduction. [11]
An official Budget 2025 FAQ document hosted on the Income Tax Department’s site also states:
- The maximum total income with NIL tax liability in the new regime is ₹12 lakh,
- The new regime is described as the default regime, and
- Standard deduction in the new regime is ₹75,000, taking the “no tax” salary level to ₹12.75 lakh (as per the FAQ’s explanation). [12]
So why ask for joint filing if individuals already enjoy a much higher effective zero-tax threshold under the new regime?
Because the joint filing proposal isn’t only about “tax relief.” It’s also about treating the household as an economic unit, reducing incentives for income shifting, and simplifying compliance for couples who manage finances jointly. [13]
Who could benefit most if India allows joint income-tax filing?
Based on how joint systems work internationally—and on the scenarios discussed in Indian reporting—the likely winners are:
Single-earner or uneven-income households
When one spouse earns most (or all) of the income, a joint framework that widens slabs can reduce the “single-earner penalty” that sometimes exists in progressive tax systems.
This is one reason ICAI has framed the proposal as reflecting “household realities” and reducing incentives to split income artificially across family members. [14]
The Times of India also highlighted single-earner households and families with shared costs (children, home loans, medical expenses) as categories that could see meaningful impact—if the deduction and slab architecture is designed well. [15]
Couples who want simpler compliance
For many households, one partner effectively manages compliance work (documents, deductions, tax notices). A consolidated return could reduce duplication—though only if systems are redesigned to make joint reconciliation smooth. [16]
Who might not benefit—or could even lose?
Dual-income couples near higher slab thresholds
This is the classic “marriage penalty” risk seen in some countries: when two similar incomes are combined, the household can move into higher marginal rates faster.
The Times of India explicitly flags this: joint taxation may not help dual earners and could raise liability if combined income pushes the couple into steeper slabs—hence the “optional” design. [17]
High-income couples if surcharges aren’t redesigned carefully
India’s surcharge structure is sensitive to threshold design. ICAI’s reported recommendations around surcharge thresholds reflect concerns that headline slab rationalisation can still leave taxpayers facing higher surcharge impacts at certain income points. [18]
The hard part: implementing joint filing in India is not a “small tweak”
Even supporters acknowledge that joint filing would require significant engineering across law and administration.
The Times of India notes that India’s compliance infrastructure—PAN-based tracking, TDS/TCS reconciliation, challans, return processing—is architected around individuals, and joint filing would mean structural changes to data and processing systems. [19]
Tax expert CA (Dr.) Suresh Surana, quoted by The Financial Express, also warned that a joint filing framework would require comprehensive changes across deductions, exemptions, surcharges, and compliance procedures—not just a new ITR checkbox. [20]
This design challenge matters for another reason: India is already preparing for a broader legislative transition. The Income-tax Bill, 2025 proposes to replace the Income-tax Act, 1961 and is slated to commence on April 1, 2026, according to PRS’s bill summary. [21]
A PIB note on the Income Tax Act, 2025 also highlights an effective date of April 1, 2026 and structural shifts like introducing a “Tax Year” concept. [22]
While this modernization may create a window for reform, it also raises the bar: joint filing would need to be carefully woven into a system already undergoing change.
What other countries’ systems reveal: joint filing helps some, hurts others
International comparisons are often cited in India’s joint filing debate—but they’re not one-size-fits-all.
United States: “Married filing jointly” is a standard filing status
The IRS lists Married filing jointly as one of the five primary filing statuses, and notes couples may also choose married filing separately in some circumstances. [23]
This is the model many Indian discussions reference: a clear legal status, clear allocation rules, and mature administrative systems built around household filing.
Germany: couples can choose joint or individual assessment
A tax authority page from Baden-Württemberg explains that spouses/partners can choose between joint assessment and individual assessment, and that under joint assessment, income is combined and tax is calculated using a “splitting” method. [24]
Research caution: joint systems can create “marriage penalties”
OECD research on married-couple tax-transfer treatment notes that tax-transfer systems can generate “marriage penalties” depending on design and how transfers interact with taxes—often affecting incentives for secondary earners. [25]
For India, this is a key policy question: How do you support single-income families without discouraging second earners or creating inequities across household types?
The revenue question: can India afford a bigger household-level exemption?
Every structural tax reform has a fiscal footprint. India’s government has emphasized tax relief in recent budgets, while also tracking revenue targets.
A Reuters report in December 2025 noted India’s net direct tax collections rose year-on-year in April–December, and referenced the government’s confidence about meeting full-year targets despite a personal tax reduction announced earlier in 2025. [26]
That context matters: a joint taxation option that materially expands exemptions or rebates could be politically popular, but it must also fit inside fiscal constraints—especially if take-up is high among middle- and upper-middle-income households.
If Budget 2026 adopts it, here are the key details taxpayers should watch
If the Finance Ministry seriously considers optional joint taxation for married couples, the “headline announcement” will be only the beginning. The real impact will depend on design choices such as:
- Eligibility rules
- Legally married only, or also civil partnerships (where applicable)?
- How to handle marriage during the year, separation, divorce, or death of a spouse?
- Slabs, rebates, and special-rate income
- Would the ₹12 lakh “no tax” outcome under the new regime have a joint equivalent?
- Would the framework exclude special-rate income (like certain capital gains) from rebates, similar to current structure? (Budget communications already carve out “special rate income” in explaining the ₹12 lakh benefit.) [27]
- Liability and compliance
- Would both spouses be jointly liable for tax dues and penalties (as in many joint systems)?
- How will notices, refunds, and demand orders be handled?
- Deductions and house property rules
- How would home-loan interest, deductions, and exemptions be allocated within a joint return?
- Interaction with the evolving legal framework
- Whether joint taxation is introduced alongside, or after, the transition toward the Income-tax Act/Bill 2025 architecture commencing April 1, 2026. [28]
Bottom line: a “game changer” is possible—but only with careful guardrails
ICAI’s optional joint taxation proposal is gaining attention because it speaks to a real tension in the tax system: individual-based assessment vs. household-based living. [29]
Supporters argue it could simplify filing and better support single-income families. Critics (and even supporters) acknowledge the risks: complexity, potential misuse, uneven benefits, and the possibility of creating marriage penalties for some couples.
For now, what’s clear is this: the proposal is not law yet—but it is now prominent enough in pre-budget discussions that taxpayers and employers should watch for concrete signals in Budget 2026-27 announcements and the fine print that follows. [30]
References
1. timesofindia.indiatimes.com, 2. timesofindia.indiatimes.com, 3. timesofindia.indiatimes.com, 4. timesofindia.indiatimes.com, 5. www.icai.org, 6. www.newindianexpress.com, 7. www.newindianexpress.com, 8. timesofindia.indiatimes.com, 9. www.newindianexpress.com, 10. www.newindianexpress.com, 11. www.pib.gov.in, 12. incometaxindia.gov.in, 13. timesofindia.indiatimes.com, 14. www.newindianexpress.com, 15. timesofindia.indiatimes.com, 16. timesofindia.indiatimes.com, 17. timesofindia.indiatimes.com, 18. www.newindianexpress.com, 19. timesofindia.indiatimes.com, 20. www.financialexpress.com, 21. prsindia.org, 22. www.pib.gov.in, 23. www.irs.gov, 24. finanzamt-bw.fv-bwl.de, 25. www.oecd.org, 26. www.reuters.com, 27. www.pib.gov.in, 28. prsindia.org, 29. www.newindianexpress.com, 30. timesofindia.indiatimes.com
