Published On:
January 29, 2026
Updated On:
January 30, 2026
The Institute of Chartered Accountants of India (ICAI) has proposed a "Joint Taxation" system for married couples in the Union Budget 2026-27. This optional regime would allow spouses to pool their incomes and deductions, potentially offering significant tax relief for households with uneven incomes, especially those managing home loans and rental properties.
As the conversation around India's Union Budget 2026 gathers momentum, a transformative idea from the Institute of Chartered Accountants of India (ICAI) is capturing the attention of taxpayers and financial planners across the country. Moving beyond traditional individual-centric taxation, the accounting body has put forward a significant proposal for an optional joint taxation system for married couples. This potential shift is not just an administrative tweak; it represents a fundamental rethinking of the household as a single economic entity, promising to overhaul the complex mathematics behind home loan benefits and rental income taxation for millions of families.
Currently, the Indian Income Tax Act views every individual as a distinct taxpayer, irrespective of their marital status. While this structure is functional for dual-income households with comparable earnings, it often creates a disproportionate tax burden on single-income families or couples where there is a significant income disparity between spouses. The ICAI’s pre-budget memorandum envisions a system where couples can voluntarily choose to combine their total income and file a single, unified tax return.
Under this proposed regime, the tax structure itself would likely undergo a revision for joint filers. This could involve potentially doubling the basic exemption limits and adjusting income tax slabs to account for the pooled household income. The primary goal is to introduce a greater degree of fairness into the tax system, ensuring that families with similar total earnings contribute a similar amount in taxes, regardless of whether that income comes from one partner or both. This move would align India with several global economies, such as the United States and Germany, that already recognize the household as the primary unit for taxation.
The most intricate and potentially most beneficial aspect of this proposal lies in its treatment of real estate investments, a cornerstone of Indian family wealth. For many, real estate is a shared asset, yet the tax benefits are currently compartmentalized in ways that can be inefficient.
Under the existing individual filing system, income from a rented property and the interest paid on its home loan are split between spouses based strictly on their ownership share. A very common scenario for real estate investors involves financing a property with a substantial home loan. In the initial years of the loan, the interest payments often far exceed the rental income generated, resulting in a "loss from house property" for tax purposes.
The problem arises when one spouse has little to no other taxable income. Their share of this property loss effectively goes unutilized because there is no income against which it can be offset. The joint taxation proposal seeks to directly address this mismatch. By pooling all income and deductions at the household level, these early-stage, interest-heavy losses from a rented property can be fully offset against the couple’s combined gross total income. This seemingly technical change would significantly improve the absorption of tax breaks, aligning the tax treatment much more closely with the actual cash outflow of the family.
The vision for joint filing also extends to how standard home loan deductions are claimed. For a self-occupied property, the current interest deduction limit is capped at a specific amount per individual (currently ₹2 lakh). Under a joint filing system, this limit would likely apply once per household. While this might seem like a restriction for some, the real benefit accrues in other areas. For let-out properties, where the interest deduction is currently uncapped, the pooling mechanism becomes a powerful tool. The entire interest burden of the household's investment properties could be set off against their combined income, potentially lowering their overall tax slab significantly.
A natural question arises regarding other popular tax-saving avenues, particularly those under Section 80C, which covers investments like PPF, EPF, and the principal repayment on home loans. The logical extension of a joint income philosophy is a consolidated household limit for these deductions. While the proposal suggests that standard deductions for two salaried individuals might remain separate to maintain parity, other investment-linked deduction limits would likely merge into a single family cap. While this might reduce the "duplication benefits" that some dual-income couples currently enjoy by claiming separate 80C limits, it would simplify compliance and reflect true household savings behavior rather than tax-driven investment structuring.
The proposed joint tax filing system is designed as an optional scheme, a crucial detail that acknowledges it is not a one-size-fits-all solution. The clearest winners would be single-income households. Currently, a single earner with a high income pays significantly more tax than a couple earning the same total amount split equally. Joint filing would smooth out this disparity, lowering the effective tax rate for the family. Similarly, couples with uneven incomes, where one partner earns significantly more than the other, would see a reduced liability as the high earner’s income is effectively distributed across wider, lower tax brackets of the joint structure. For high-income dual earners who are both already in the highest tax bracket, the traditional individual filing method might remain more tax-efficient.
While this remains a proposal aimed at the upcoming budget, it signals a progressive shift in policy thinking. By moving towards a system that recognizes the financial reality of shared lives, debts, and assets, the government has the opportunity to simplify the tax code and provide meaningful financial relief to a large section of middle-class families.
