Income Tax Budget 2026: US-Germany like tax system in India? Who will benefit from the joint tax system?

• ICAI’s Big Proposal Ahead of Budget 2026
• Joint tax return for spouses
• One return, less documents; An easier life for taxpayers

Income Tax Budget 2026: The Institute of Chartered Accountants of India (ICAI) has made a suggestion to the Finance Ministry for the upcoming Budget 2026. The proposal gives spouses an option to file joint income tax returns instead of filing taxes separately. Currently, taxes are levied on a per capita basis in India, which increases the burden on families where only one earning member works. This change will not only bring a big relief to the middle class but will also bring India’s tax structure at par with developed countries like the US and Germany.

Currently, under the new tax regime, both husband and wife are entitled to a basic tax exemption of Rs 4 lakh. If only the husband earns, he is eligible for exemption only on his share, so that the wife’s income tax exemption is not used. ICAI argues that this forces many families to document income in favor of other members to save tax.

Also read: Ayushman Bharat Scheme: A Solace Decision for the Poor? Insurance limit of Ayushman Bharat will be doubled

Countries such as the US, Germany and Portugal already have Married Filing Jointly (MFJ) facilities for married couples. In these countries, filing a joint return doubles the tax slab limit, preventing households from falling into a higher tax bracket. This increases household savings and reduces the likelihood of tax evasion as income distribution is clear.

If the government accepts this suggestion in the 2026 budget, the basic exemption limit for spouses can also be doubled to Rs 8 lakh. This means that households with an annual income of up to Rs 8 lakh will not have to pay any tax, which will increase their disposable income. As per ICAI’s notification, the top tax rate of 30% will apply only to those with income above Rs 48 lakh.

Also read: Reliance Industries Stock Fall: Fall in Reliance’s shares, Rs

Experts believe that the introduction of joint taxation will significantly simplify cases where property is held jointly in favor of spouses. Often, such assets are funded by a single person, which poses the risk of scrutiny and notices from the Income Tax Department. Filing a single return will reduce the paperwork and compliance burden, saving time for taxpayers and the department.

ICAI has also clarified in its proposal that the option of filing joint returns should be optional and not mandatory. Taxpayers who wish to remain in the old or current mode of filing individual returns should be allowed to do so. With a valid PAN card, spouses will be able to pool their income, which is expected to significantly improve the financial situation of middle-class families.