Once implemented, the joint tax system will be extremely useful for single-income families, retired couples, and families where the tax exemption for the non-earning spouse currently goes unused.
In a significant step, the Institute of Chartered Accountants of India (ICAI), the apex body of tax experts and chartered accountants, has proposed a system that could completely overhaul tax calculations for married couples. Currently, the income tax system in the country treats individuals as the basic unit, not families. Despite getting married, husbands and wives are required to file separate tax returns, even though household expenses, investments, and future planning are done together.
According to the Institute of Chartered Accountants of India (ICAI), married couples should have the freedom to choose whether to file their taxes separately or jointly. It implies that husbands and wives be given the option to either continue with the current personal tax system or file a joint tax return. Under this proposed system, both spouses would need to have separate PAN cards, and their combined income would be taxed according to a new and separate tax slab.
What are the proposed changes?
According to the ICAI-proposed change, the basic exemption limit in joint taxation can be doubled. This will translate into no tax on the combined income of up to Rs 8 lakh, while the top tax slab of 30 per cent may apply to income exceeding Rs 48 lakh. This step will significantly benefit families where only one person is earning or where one spouse’s income is very low.
To ease tax planning
Once implemented, the joint tax system will be extremely useful for single-income families, retired couples, and families where the tax exemption for the non-earning spouse currently goes unused. Additionally, the proposed system will help in better utilisation of home loans, tax-saving investments,and health insurance, among others. According to experts, the updated policy will ease tax planning while reducing the need for complex methods like income splitting.
It is to be noted that joint taxation may not be beneficial for every couple. For couples with high incomes, combining their income could push them into higher tax brackets or surcharges, potentially increasing their tax burden.
