With the Union Budget 2025 set to be presented by Finance Minister Nirmala Sitharaman on February 1, the Institute of Chartered Accountants of India (ICAI) has put forth a set of recommendations aimed at simplifying tax laws, reducing litigation, and easing compliance burdens. Among the most notable suggestions is the introduction of joint taxation for married couples, a move that could redefine how households file their taxes.
Let’s take a closer look at ICAI’s key proposals and what they mean for taxpayers.
1. Joint Taxation for Married Couples: A Game-Changer?
ICAI has proposed giving married couples the option to file taxes jointly as a single unit, similar to systems followed in countries like the United States and the United Kingdom. Currently, Indian tax laws treat spouses as separate taxable entities, often leading to higher tax outflows—especially in cases where one spouse earns significantly more than the other.
Proposed Tax Slabs for Joint Taxation
The suggested new tax structure for married couples includes:
- Up to ₹6 lakh – No tax
- ₹6 lakh – ₹14 lakh – 5% tax
- ₹14 lakh – ₹20 lakh – 10% tax
- ₹20 lakh – ₹24 lakh – 15% tax
- ₹24 lakh – ₹30 lakh – 20% tax
- Above ₹30 lakh – 30% tax
Additionally, the basic exemption limit would be doubled from ₹3 lakh to ₹6 lakh for those opting for joint filing. The surcharge threshold would also be revised, reducing the tax burden on high-income earners.
Why Does It Matter?
The current system works well for salaried couples who can claim deductions separately, but it disadvantages single-income families. Allowing joint taxation would help distribute tax liabilities more fairly among households.
2. Simplifying the Income-Tax Act, 1961: A Step Towards Clarity
As part of the comprehensive review of the Income-tax Act, 1961, ICAI has called for simplification of tax laws—not just in language but also in structure. The goal? To reduce ambiguity, cut down disputes, and make compliance easier for taxpayers.
Some key recommendations include:
- Introduction of a special tax regime for firms/LLPs
- Easier registration process for charitable trusts
- Simplification of rules for determining residential status
- Automatic inclusion in special tax regimes without the need for separate forms
These measures would ensure that tax laws are more accessible, predictable, and efficient.
3. Reducing Litigation: Easing the Burden on Taxpayers
Tax disputes have long been a pain point for both the government and taxpayers. ICAI has proposed several measures to reduce litigation, including:
- Limiting tax adjustments under Section 143(1)(a) to arithmetical errors and clear miscalculations.
- Periodic review of pending tax cases to ensure quicker resolution.
- A mandatory time limit for disposing of appeals, preventing undue delays.
- Stronger grievance redressal mechanisms to address taxpayer concerns effectively.
If implemented, these changes could make tax compliance less stressful and improve the efficiency of tax administration.
4. Lowering the Compliance Burden: Making Tax Filing Easier
Filing taxes in India can be an overwhelming process, but ICAI has suggested reforms to make it simpler, including:
- A year-wise E-Ledger system for tracking TDS/TCS and advance tax payments, reducing manual effort.
- Extension of the deadline for filing belated returns to March 31 of the assessment year.
- Simplified income-tax return (ITR) forms to cater to different taxpayer needs.
- Addressing concerns in the faceless assessment system to ensure fair evaluations.
These measures aim to cut down bureaucracy and allow taxpayers to focus on their finances rather than endless paperwork.
5. Pre-Budget Memorandum: Tax Reforms for Economic Growth & Sustainability
ICAI has also submitted its Pre-Budget Memorandum 2025, which highlights tax policies that can drive economic growth while encouraging sustainable business practices.
Some of the major suggestions include:
- Tax incentives for climate change mitigation strategies, supporting India’s sustainability goals.
- Promoting property ownership by women by reducing stamp duty and removing restrictive provisions.
- Introducing a new category of income (“Income from Shares and Securities”) to simplify taxation on dividends, interest, and capital gains.
- Aligning depreciation rates with the Companies Act, 2013, for better consistency.
- Rationalizing capital gains provisions to remove unnecessary complications.
By addressing these areas, ICAI envisions a tax system that is growth-oriented, environmentally responsible, and easy to navigate.
ICAI’s recommendations for joint taxation, simplification of laws, reduced litigation, and lower compliance burdens could significantly reshape India’s tax landscape. If the government adopts these proposals, the Union Budget 2025 could mark a new era of fairness, efficiency, and taxpayer-friendly policies.
With Budget Day fast approaching, all eyes will be on how many of these recommendations make it to the final draft. Will India see a simpler, more equitable tax system? We’ll find out soon.
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