Based on current trends, the Government may introduce joint taxation for married couples as part of the Union Budget 2026 - 2027. This would be a major change to India's current personal income tax structure and would have significant implications on households' tax liability and with respect to income distribution in India.

As it currently stands, India operates under an individual tax system and therefore:

- Each spouse currently files their own tax return

- Each spouse has their own PAN number, tax slab, tax deductions and exemptions

- Existence of a marriage does not add a tax advantage to either spouse

- If one spouse is a non-earner, the unused basic exemption that could be claimed by the non-earner will be wasted.

This individual tax structure generally creates a higher effective tax burden on families, particularly if they have a one-source-of-income (single-income) family.

What would Joint Filing Change?

The potential benefits of a joint filing structure for married couples include:

- The ability to bring together all sources of income for a household and file a joint tax return.

- An increase in the slab efficiency through the use of the clubbed income will reduce the marginal rate of tax that is payable on a couple

- Improved use of tax deductions (e.g. tax deductions available under the income tax provisions for home loan interest, Section 80C, Section 80D).

- An increase in the basic exemption for all households.

- Potentially allowing for each spouse to claim a standard deduction regardless of whether they are married or single.

Impact Snapshot is a way of illustrating how there will be changes in tax systems based on a new joint taxation method as compared to the current individual taxpayer system. The following illustrates some of the differences.

Parameterised Example for Comparison of Current vs. Proposed Tax Systems

Tax Unit	Individual	Household
Basic Exemption	₹2.5–3 lakh/person	Combined Threshold (i.e., bigger than the current system)
Slab Utilisation	Not always the most efficient way	More efficient/optimised
Surcharge Trigger	₹50 Lakh	May increase to ₹75 Lakh or more.
Middle-Class Relief	Very limited	Very significant

 Global Taxation Systems as Precedent for Joint Tax Systems           

Country	Structure/Tax Methodology
U.S.	Married couples can elect to file jointly and have both incomes considered when determining taxes.
Germany	has an income splitting option (Ehegatten splitting) when determining taxes.
France	Uses family quotient when determining taxes (i.e. one tax unit can have more than one part).
India (Proposed)	Moving from being treated as two individuals to a single-family unit, as measured economically.

                     

              Visualising the Change from the Current System to the New Proposed System

Current Husband/Wife Taxation System

Husband's Income          Individually Taxed

Wife's Income   Individually Taxed

↓

Total Combined Taxed Income at a Higher Level of Taxation

 

Proposed Joint Taxation System

Combined Household Income

↓

Combined Optimised Tax Rate Slabs based on combined income

↓

Reduced Effective Tax Rate Based on Household Income

 

Who Gains the Most?

Households

              •            Single-income families

              •            Upper middle-class families

              •            Families close to the surtax threshold

              •            Investing in housing, healthcare and insurance

 

If the surtax threshold were increased from ₹50 lakh to ₹75 lakh or more, then the relief would be significant rather than just cosmetic.

 

What is the importance of the Budget 2026

Budget 2026-27 is due to be presented on the 1st of February 2026. If the reform is approved, it would be

• A fundamental restructuring of the way we do taxation, rather than just increasing or decreasing taxes
• Moving away from taxing the individual to creating a more family-focused, fairer treatment in tax
• Accepting that households are the real decision-making units of the economy

 

This reform will be transformative in terms of restructuring India’s current tax framework, rather than simply providing some short-term relief to middle-income households. It should also provide immediate relief, increase disposable incomes and increase the rate of economic activity. Ultimately, this increase in demand from consumers for essential and discretionary products may become the catalyst for an expanded overall market. These types of structural changes over time should shape India's transformation from an emerging market into a fully developed economy on the world stage.

References

Government of India. (2024). Income-tax Act, 1961 (as amended). Ministry of Finance, Department of Revenue.

Ministry of Finance, Government of India. (2024). Union Budget 2024–25: Budget documents and explanatory memorandum. Government of India.

Ministry of Finance, Government of India. (2023). Report of the tax reforms committee and personal income tax simplification notes. Government of India.

Organisation for Economic Co-operation and Development. (2021). The taxation of families and households. OECD Publishing

Organisation for Economic Co-operation and Development. (2022). Taxing wages 2022–23: Special features of household taxation. OECD Publishing

Internal Revenue Service. (2023). Filing status—Married filing jointly. U.S. Department of the Treasury

Federal Ministry of Finance. (2022). Income splitting for married couples (Ehegattensplitting). Government of Germany

Ministry for the Economy, Finance and Industrial and Digital Sovereignty. (2022). The family quotient system in personal income taxation. Government of France.

International Monetary Fund. (2023). Fiscal monitor: Equity and efficiency in tax policy. IMF.

Reserve Bank of India. (2023). State of the economy report. RBI.