In a recent move that could change the tax system in India, the Institute of Chartered Accountants of India ( ICAI ) has proposed to the government to allow married couples to file joint income tax returns. This is a practice that has been widely accepted and practised globally.
Joint Taxation permits married couples to combine their incomes and file a single tax return. This system often results in a lower tax liability, benefiting families with a sole or primary earner. In nations like the United Kingdom, Estonia, the United States of America, France (for families), etc, joint filing offers higher exemption thresholds and wider tax brackets, easing household financial burden.
Under the ICAI’s proposal, couples choosing for joint filing would enjoy a higher exemption threshold of ₹6 lakh, double the current individual tax limit. The proposed tax slabs for joint filing as put forth by ICAI are:
Furthermore, the threshold would rise from ₹50 lakhs to ₹ 1Crore, and both partners would be eligible for the standard deduction if both are salaried.
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The ICAI suggests that such joint taxation could reduce the tax burden for single-income families in India. Under the current tax system, the spouses file the tax returns separately, which leads to higher taxes when there is an income disparity between partners.
A joint taxation system could encourage family tax savings, mainly where one spouse earns more than the other. For example, if one spouse earns ₹13 lakhs and the other earns ₹1 lakhs, making their combined income ₹14 Lakhs, which might fall under a tax-free threshold (Source: newsd.in). This will help reduce their overall liability.
Tax consultant Adv. Arun Shankar C.S. from Warrier & Associates, Kerala, stated that when the government implements any changes to the already existing tax systems, it should be done to benefit the taxpayers subject to such a system. If this new venture of joint taxation can help taxpayers, it will provide significant relief to families and households depending on single earners.
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While promising, the proposal isn’t without concerns. Some experts state that such taxation has the potential to be misused in ways like income shifting to exploit lower tax rates. Ensuring safeguards and accurate guidelines is essential to prevent tax evasion and maintain the tax system’s integrity. The implementation of joint taxation would need changes to the current tax structure. Introducing new tax slabs, exemptions, and rates would need to be overseen with utmost clarity, and this process can be lengthy and time-consuming.
Adoption of joint taxation could align India with international communities and practices, offering much-needed relief to many families. However, careful consideration and planning are essential to address potential risks inherent in such a system and ensure equal benefits for all.
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