Taxing Together: How Joint ITRs Could Empower Middle Class

The Institute of Chartered Accountants of India (ICAI) has proposed a joint income tax return (ITR) system for married couples. This optional system would allow couples to file a single, consolidated return combining their incomes and deductions. Modelled after systems in countries like the US and UK, it aims to simplify tax filing, offer potential relief through revised tax slabs, and benefit single earner families or those with complex finances. 

The proposed introduction of joint Income Tax Returns (ITRs) for married couples is a significant reform aimed at providing financial relief and empowering India's middle class. This system would permit couples to combine their incomes, which could effectively double key tax exemptions and reduce the overall tax liability for many households.

Key Features of Proposed Joint ITRs  

• Optional Filing: Married couples would have the choice to be assessed as a single tax unit, mirroring systems in the US and UK. 
• Higher Exemption: The basic exemption limit would double from ₹3 lakh to ₹6 lakh for joint filers. 
• Revised Tax Slabs: The proposal introduces new, progressive tax slabs with higher income thresholds and raises the surcharge limit from ₹50 lakh to ₹1 crore. 
• Filing Flexibility: Couples could alternate between joint and individual filing each year to opt for the most financially beneficial status. 

Potential Benefits for the Middle Class 

• Substantial Tax Savings: A married couple earning ₹14 lakh jointly could pay no tax, as the ₹6 lakh exemption is double the individual limit. 
• Broad Applicability: The reform offers the greatest relief to two-income households but also reduces the tax burden for families with one earner. 
• Economic Stimulus: The resulting increase in disposable income should boost middle-class spending, savings, and overall financial health. 
• Simplified Compliance: Easier filing and clearer rules may discourage tax evasion, particularly benefiting the salaried employees who make up most of India's middle class. 

Limitations and Considerations 

• The proposed system is expected to deliver disproportionate advantages to households with two income earners, while the relative benefit for singleincome families may be more limited. 
• The efficacy of the joint ITR reform is contingent upon supportive fiscal policy; without it, any direct tax relief for the middle class could be negated by a regressive indirect tax burden or provisions that disproportionately benefit high-net-worth individuals.

Overall Socio-Economic Impact 

Joint ITRs can empower the middle class through higher take-home pay, fueling savings, investment, and domestic spending. This reform also represents a step toward addressing systemic inequality, rebalancing a tax structure that currently burdens the middle class with a heavy share of direct and indirect taxes.

Comparison  

Example: 

• Husband's Income: ₹10 lakhs 
• Wife's Income: ₹5 lakhs 
• Combined Income: ₹15 lakhs 

Current System (Individual Filings): 

• Husband's Tax (New Regime): ₹78,000 
• Wife's Tax (New Regime): ₹12,500 
• Total Tax Outgo: ₹90,500 

Proposed Joint System: 

• Combined Income: ₹15 lakhs 
• Tax calculated on joint slabs (e.g., 0% on first ₹6L, 10% on next ₹8L): ₹80,000 
• Total Tax Outgo: ₹80,000 

Result: The couple saves ₹10,500 immediately. This saving can be channelled into investments, savings, or consumption. 

Conclusion 

The transition to a Joint ITR system marks a pivotal shift from viewing taxpayers as isolated individuals to recognizing them as integrated family units. This is a fundamental socio-economic realignment. By mirroring the actual financial management of middle-class India, the reform holds the power to free up household income, foster greater gender equity, and ultimately cultivate a more robust and inclusive economic landscape. 

FAQs 

Is joint ITR mandatory? 

No, it's proposed as an option alongside existing individual filing systems. 

How are deductions handled? 

Standard deduction applies for both spouses; other deductions like 80C/80D must be attributed to the individual who incurred the expense. 

Can couples file jointly if one spouse has no income? 

Yes, this especially benefits households with a single earner. 

What about changes in marital status (separation/divorce)? 

Successful implementation will require robust systems to track marital status and prevent fraud in joint filings.