The Modi government is reportedly working on a major tax reform ahead of the Union Budget 2026. According to reports, an optional joint taxation system for married couples is under consideration. If introduced, this would allow husbands and wives to file income tax returns jointly, marking a structural change in India’s individual-based tax framework.
Why this matters for traders and investors
The proposal is expected to benefit single-income households the most, a category that includes many full-time traders, long-term investors, and self-employed professionals. Under the current system, if one spouse has no taxable income, their basic exemption limit and slab benefits remain unused, increasing the family’s overall tax burden.
How the current system works
India’s tax laws make no distinction between married and unmarried individuals. Each spouse is taxed separately, with individual PANs, exemptions, and deductions. As a result, households dependent on a single earning member are unable to optimise tax efficiency at the family level.
Recognising this issue, the Institute of Chartered Accountants of India has recommended the introduction of an optional joint tax filing mechanism.
What joint taxation could look like
Under a joint taxation system, the combined income of both spouses would be taxed together, potentially under revised or separate slabs. Reports suggest the basic exemption limit could be increased, allowing better utilisation of tax-free income at the household level.
Deductions such as house loan1 interest, medical insurance premiums, and other allowances could be adjusted more efficiently. Even if both spouses are earning, they may still be eligible for separate standard deductions, preserving flexibility for dual-income families.
Similar systems already exist in countries like the United States and Germany, where a family is treated as a single economic unit for taxation purposes.
Possible surcharge relief
Another key area under discussion is surcharge rationalisation. Currently, surcharge applies on incomes above ₹50 lakh. Under joint taxation, this threshold could be raised to ₹75 lakh or higher. This could offer meaningful relief to higher-income families, including traders and investors with volatile or cyclical income patterns.
What to watch in Budget 2026
The Union Budget 2026–27 will be presented on February 1 by Finance Minister Nirmala Sitharaman. The Budget Session will begin on January 28 and continue until April 2.
If implemented, this proposal would represent a significant shift in India’s tax structure, with direct implications for household cash flows, post-tax investable surplus, and long-term financial planning for traders and investors.