As of now, India does not have a provision for filing joint income tax returns like in some other countries (e.g., the USA). Under the Indian tax framework, every individual must file their tax returns separately. However, there are discussions and proposals in the pipeline, especially for Budget 2025, to introduce reforms that could allow joint tax filing for married couples.
Here’s a detailed overview of the current system and the proposed reforms:
Current Scenario: Filing Taxes Individually
- Individual Filing Mandate
Separate Returns: Each individual, regardless of marital status, must file a separate income tax return (ITR) based on their taxable income.
Tax Slabs: Taxpayers are taxed individually according to the applicable tax slab rates under the chosen tax regime (old or new).
- Income Splitting Strategies
While joint filing is not allowed, families often use income-splitting strategies to reduce tax liability:
Ownership of Assets: Income from assets (e.g., rental property) owned by each spouse is taxed individually.
Investments in Each Spouse’s Name: Tax-saving investments can be split between spouses to maximize exemptions and deductions.
- Tax Benefits for Spouses
Deductions and Exemptions: Both spouses can claim individual deductions for eligible expenses (e.g., medical insurance under Section 80D).
Clubbing Provisions: Incomes transferred to a spouse may be clubbed with the income of the transferor, preventing misuse.
Proposed Reforms for Joint Filing
The Institute of Chartered Accountants of India (ICAI) and other bodies have suggested introducing an optional joint filing system for married couples in Budget 2025.
Key Features of Proposed Reforms
- Optional Joint Filing
Couples can choose between filing individually or jointly.
Joint filing would allow them to consolidate their incomes and deductions under one return.
- Enhanced Exemptions
The basic exemption limit for joint filers could be doubled (e.g., from ₹3 lakh to ₹6 lakh).
Additional deductions or tax credits may be introduced for married couples.
- Simplified Compliance
A single return for both spouses would reduce the administrative burden.
- Eligibility Criteria
Likely restricted to married couples with documented proof of marriage.
Applicable to residents only, with specific rules for non-residents.
Potential Benefits of Joint Filing
- Lower Tax Liability: Combining incomes and deductions may reduce the overall tax liability for households with a single earner or disproportionate incomes.
- Streamlined Process: Filing a single return simplifies compliance for couples.
- Family-Friendly Policies: Encourages tax policies that are more aligned with family structures.
How to File Taxes in the Current System
- Individual Tax Filing Process
Step 1: Determine total taxable income for the financial year.
Step 2: Choose the tax regime (old or new).
Step 3: Claim deductions and exemptions where applicable.
Step 4: Compute the tax liability based on applicable slab rates.
Step 5: File the income tax return through the e-filing portal (www.incometax.gov.in).
- Investments to Maximize Benefits
Even without joint filing, spouses can benefit by splitting investments and expenses to claim:
Deductions under Section 80C (e.g., PPF, ELSS).
Health insurance premiums under Section 80D.
Housing loan interest under Section 24(b).
What to Expect if Joint Filing is Introduced?
- Joint Calculation of Income
Income from all sources (salary, investments, property) of both spouses would be consolidated.
- Revised Tax Slabs
Tax slab rates for joint filers may be introduced or adjusted to provide relief.
- Documentation Requirements
Proof of marriage and individual incomes may be required for joint filing.
Conclusion
Currently, the Indian tax system requires individuals to file separate returns, but the introduction of joint filing in Budget 2025 could mark a significant reform in tax policy. This change would benefit married couples by reducing tax burdens and simplifying compliance. Until joint filing becomes a reality, taxpayers can continue to optimize their taxes by leveraging individual deductions, exemptions, and investments.
Stay updated with government announcements and consult a tax professional to maximize benefits under the evolving tax framework.
