Budget 2026 Expectations: ICAI Proposes Joint Taxation for Married Couples and New Income Tax Slabs
Budget 2026: As Finance Minister Nirmala Sitharaman gears up to present the Union Budget 2026 on February 1, expectations are soaring high among salaried taxpayers and the middle class. Industry bodies, specifically the Institute of Chartered Accountants of India (ICAI), have submitted detailed proposals aimed at simplifying the tax structure. A standout suggestion this year is the introduction of a “Joint Taxation Mechanism” for married couples, which could redefine how families manage their taxes.
Proposal for Joint Taxation for Married Couples
One of the most discussed proposals ahead of Budget 2026 is the optional ‘Joint Taxation’ scheme. The ICAI has suggested this reform to bridge the disparity between single-earner families and households where both spouses earn.
Currently, a household with a single earner pays significantly more tax compared to a couple earning the same total amount split between two salaries (who benefit from two separate basic exemption limits).
Key Features of the Proposal:
- Optional Scheme: Couples can choose to file a single combined return or continue filing separately as they do now.
- Double Exemption: The scheme proposes doubling the basic exemption limit to support families dependent on a single income source.
- Standard Deduction: It is proposed that the standard deduction remains available independently to each spouse, even under the joint filing mechanism.
Proposed Tax Slabs for Joint Taxation
The ICAI has suggested a specific slab structure for couples opting for this regime:
| Income Range (₹) | Proposed Tax Rate |
|---|---|
| Up to 8,00,000 | Nil |
| 8,00,001 to 16,00,000 | 5% |
| 16,00,001 to 24,00,000 | 10% |
| 24,00,001 to 32,00,000 | 15% |
| 32,00,001 to 40,00,000 | 20% |
| 40,00,001 to 48,00,000 | 25% |
| Above 48,00,000 | 30% |
Additionally, for high-income households, the surcharge thresholds are proposed to be raised significantly (starting from ₹1.5 Crore) to reflect the combined income status.
Middle Class Relief and Income Tax Slabs
With inflation eating into household savings, there is a strong demand to revise the existing tax slabs. Currently, under the New Tax Regime, the basic exemption limit is ₹3 Lakh.
Experts anticipate that the basic exemption limit under the New Tax Regime could be hiked to ₹5 Lakh. Furthermore, there are hopes for revisions in House Rent Allowance (HRA) rules to align with the actual rental costs in metro cities.
Deductions: Health Insurance and Standard Deduction
A major point of contention has been the absence of deductions like Section 80C and 80D under the New Tax Regime, which is now the default option.
- Health Insurance (Section 80D): Bodies like the ICAI have strongly recommended allowing deductions for health insurance premiums under the New Tax Regime. With rising medical costs, insurance is viewed as a necessity rather than an investment.
- Standard Deduction Hike: There is a widespread expectation to increase the Standard Deduction for salaried employees from the current level (₹50,000 or ₹75,000) to ₹1,00,000 to account for inflation.
Capital Markets and Other Expectations
Beyond personal taxation, investors are looking for rationalization in capital gains taxes. There is hope for adjustments in Securities Transaction Tax (STT) and Long Term Capital Gains (LTCG) tax rates. Also, the issue of “double taxation” on dividends—where companies pay tax on profits and shareholders pay again on dividends—is expected to be addressed.
With the countdown to February 1 beginning, all eyes are on the Finance Ministry to see which of these proposals make it to the final Budget speech.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a registered financial advisor for any investment or tax-related decisions.
