By CA Surekha S Ahuja
India's individual tax system disadvantages single-earner families (nearly 70% of households), where one spouse’s basic exemption and slab capacity remains unutilised while dual-income households optimise taxation separately. This proposal introduces an optional, safeguards-driven joint taxation framework that corrects structural inequity without destabilising revenue.
The Complete Proposal
Eligibility
Married couples with valid PANs may opt for joint taxation annually through a single consolidated return (proposed modified ITR-5). The option is voluntary, reversible each year, and regime-neutral.
Computation Methodology
-
Independent deductions first: ₹75,000 standard deduction per spouse, along with eligible deductions under Sections 80C, 80D, etc.
-
Aggregation only after deductions, preserving individual savings behaviour.
-
Only domestic income eligible for pooling; global income continues to be taxed individually, preserving DTAA architecture and foreign tax credit mechanics.
Joint Slab Structure (Doubled, Not Concessional)
| Joint Income (₹ lakh) | Rate |
|---|---|
| 0 – 8 | Nil |
| 8 – 16 | 5% |
| 16 – 24 | 10% |
| 24 – 32 | 15% |
| 32 – 40 | 20% |
| 40 – 48 | 25% |
| 48 and above | 30% |
Surcharge thresholds remain fiscally neutral: ₹75 lakh per individual corresponds to ₹1.5 crore under joint taxation.
Scenario Analysis Across Household Profiles
| Scenario (Post-Deduction) | Individual Tax | Joint Tax | Impact |
|---|---|---|---|
| Single earner: ₹12L + ₹0 | ₹1.05 lakh | ₹40,000 | 62% relief |
| Dual equal: ₹6L + ₹6L | ₹40,000 total | ₹40,000 | Neutral |
| Dual unequal: ₹10L + ₹2L | ₹1.25 lakh | ₹90,000 | 28% relief |
| High dual: ₹25L + ₹25L | ₹6.4 lakh | ₹6.4 lakh | Opt-out |
The design ensures relief flows only to structurally disadvantaged households, while high-income dual earners remain unaffected.
National Impact Projections
Assuming 25 million married filers and a conservative 20% opt-in rate (5 million households):
-
Gross tax relief: ~₹15,000 crore annually
-
Incremental disposable income: ₹70,000–80,000 crore
-
GDP impact via consumption multiplier (1.2x): ~₹85,000–95,000 crore
-
Compliance improvement: +15% filing participation
-
Net revenue impact: Broadly neutral due to GST buoyancy and reduced evasion
Ironclad Data Safeguards (Zero Leakage Framework)
All income streams must converge digitally:
| Data Source | Safeguard |
|---|---|
| Form 16 | Mandatory employer-wise PAN auto-matching |
| Form 26AS | Household-level reconciliation |
| AIS | Mandatory spouse PAN disclosure |
| Employer / TDS Portals | Joint-filer flagging with penalty exposure |
Anti-abuse triggers
-
Undisclosed income → automatic disqualification + up to 200% penalty
-
Extreme income disparity → audit risk flag
-
PAN mismatch → system-level rejection
-
Business income transfers → scrutiny trail preserved
Critical Analysis: Addressing Every “If & But”
Strengths
-
Restores equity by unlocking unused exemptions
-
Recognises unpaid household and caregiving labour
-
Optional structure preserves fiscal discipline
-
Automation-led administration improves compliance
Risks Neutralised
-
Income shifting blocked via AIS/26AS matching
-
Global income ring-fenced (DTAA intact)
-
Female labour participation monitored with sunset review
-
Compliance simplified through single consolidated return
Global Benchmarking
| Model | Single Earner | Dual Earner | Fiscal Impact | India Fit |
|---|---|---|---|---|
| ICAI Aggregation Model | High relief | Neutral | Neutral | Best fit |
| German Splitting | Very high | Excellent | ~1.5% GDP cost | Complex |
| US Joint Filing | Moderate | Penalty zones | Neutral | Distortive |
| Pure Individual | Penalised | Optimised | Neutral | Inequitable |
Implementation Roadmap
-
Statutory amendment to Section 2(31) introducing “joint assessee”
-
AIS and ITR utility upgrades with spouse-PAN linkage
-
Pilot rollout in FY 2026–27 under the new tax regime
-
Continuous monitoring through CBDT analytics and Aaykar Setu
Why Budget 2026 Must Act
This reform is ICAI-backed, technically precise, economically balanced, and administratively feasible. It corrects a long-standing household inequity while preserving revenue discipline and strengthening compliance.
Nearly ₹80,000 crore of household spending power remains locked due to an outdated individual-only tax framework. Budget 2026 has the opportunity to unlock it—responsibly.
