Union Budget 2026 Could Change How Married Couples Pay Tax in India

Union Budget 2026 Could Change How Married Couples Pay Tax in India

As Union Budget 2026 approaches, tax reforms are once again in focus for India’s middle class and investor community. Amid expectations of relief on personal taxation, one proposal has caught widespread attention — allowing married couples to file a joint income tax return.

Proposed by the Institute of Chartered Accountants of India, this move could fundamentally change how Indian households are taxed. If implemented, it may reduce tax burden for millions of families, simplify compliance, and increase disposable income at a time when inflation and household expenses remain elevated.

With the government keen on boosting consumption and long-term savings, joint income tax filing could emerge as a high-impact, middle-class-friendly reform in Budget 2026.

What Is Joint Income Tax Filing and Why It Matters Now

Currently, Indian income tax law treats husband and wife as separate tax units. Each spouse must file an individual return, even if one spouse has no income and the entire household depends on a single salary.

Joint income tax filing would allow married couples to combine incomes and file one return, while keeping the system optional. Couples could continue filing separately if that works better for them.

This proposal gains relevance now because Indian family structures often function as a single financial unit, sharing expenses related to housing, education, healthcare and investments. The existing system does not fully reflect this reality.

Why ICAI Wants Households Recognised as an Economic Unit

According to ICAI, a large portion of Indian households are single-earner families. In such cases, individual exemptions and deductions often fall short of real household needs.

ICAI President Charanjot Singh Nanda has highlighted that joint taxation could increase disposable income, improve savings, and reduce compliance burden, while remaining fair through optional participation.

From a policy perspective, higher disposable income could also support consumption-led growth — an area the government is keen to strengthen in FY27.

How Joint Filing Can Reduce Tax for Married Couples

Big Relief for Single-Earner Families

This is where joint filing could make the biggest difference.

Example
If the basic exemption limit under the new tax regime is ₹4 lakh per individual, joint filing could raise the combined exemption to ₹8 lakh.

If only one spouse earns ₹8 lakh annually and the other has no income, the entire income could fall within the exemption limit under joint filing. Under the current system, the same income is fully taxed in one individual’s hands.

This directly increases take-home pay and frees up money for savings, SIPs and long-term investments.

Income Averaging for Uneven Dual-Income Households

Joint filing can also benefit families where both spouses earn, but income levels are uneven.

Example
One spouse earns ₹12 lakh
The other earns ₹3 lakh

Under individual filing, the higher earner may fall into a higher slab. With joint filing, the combined ₹15 lakh income could be taxed with higher exemption thresholds and wider slabs, reducing the overall tax outgo.

This income averaging effect is common in global tax systems and is seen as equitable for households with unequal earning patterns.

When Joint Filing May Not Be Beneficial

Joint taxation is not a one-size-fits-all solution.

For couples where both spouses earn similar and relatively high incomes, combining income could push the household into a higher tax slab.

Example
Both spouses earn ₹10 lakh each
Combined income becomes ₹20 lakh

In such cases, individual filing may remain more tax-efficient. This is why experts insist that joint filing must remain optional, giving taxpayers full flexibility.

Impact on Asset Taxation and Compliance Simplicity

Joint income tax filing could also simplify taxation of jointly owned assets.

Currently, income from jointly owned property often attracts clubbing provisions if one spouse has funded the purchase. This leads to confusion and disputes, especially in rental income and capital gains taxation.

A single joint assessment could reduce ambiguity, improve compliance, and lower litigation risk — a positive step for both taxpayers and the tax administration.

Global Examples Strengthen the Case

Several developed economies already follow joint or family-based taxation models.

In the United States, married couples can opt for married filing jointly, effectively doubling tax thresholds. Countries like Germany and Portugal also allow joint assessment, while many European nations recognise households as economic units.

India adopting a similar optional framework would align its tax system with global best practices.