Why married couples should be allowed to file taxes jointly

The family unit constitutes the foundational element of India’s demographic and societal structure, with our cultural and social fabric intricately woven around this system. However, our tax laws are rather aloof to the concept of family. India remains significantly behind other jurisdictions that have tailored their tax systems to reflect the economic realities inherent in family-based structures.

Many nations have adopted the family as a central construct in their tax frameworks and have undertaken a comprehensive reappraisal of existing tax assessment methodologies, in response to evolving social and economic dynamics. Some of the key jurisdictions around the world have already adopted some forms of family unit taxation. Key examples are:

• The US: Married couples can file taxes jointly that enable income splitting and access to tax credits like the child tax credit.
• Germany: The “Ehegatten splitting” system allows couples to pool incomes, lowering tax liability when earnings differ significantly.
• France: The “Quotient Familial” system allocates household income across a family coefficient, reducing taxable income for larger families
• Japan: Dependent and spousal deductions reduce taxable income based on family size
• Belgium, Luxembourg, Switzerland, and Portugal, offer joint taxation, income splitting, and deductions, ensuring equitable tax treatment for families.

Also Read: Can India transition to a single income tax rate?

Review of the existing system

The recognition and valuation of social institutions for tax purposes remains an under-explored area of legal study. Historically central to Hindu society, the joint family system is a unique institution. However, it only captures select elements of taxability arising out of jointly held businesses and properties. Moreover, it has become a subject of extensive litigation and, like many other time-honoured practices, is now reduced to a ritualistic formality.

Drawing some inspiration from some other jurisdictions where family unit has better assimilation in their tax laws, we should focus on the following reforms:

•  Mechanism for joint filing of tax returns for married couples like the US by introducing a new Form, allowing income to be split and deductions to be claimed collectively.
•  Implement a system for pooling family incomes and allowing for collective deductions, ensuring the tax burden is shared equitably across family members.
•  Introduce or expand tax credits specifically for dependents, including children and elderly family members, recognizing the financial responsibility families bear for their dependents.
•  Expand the scope of HUF provisions to include non-Hindu families and other family structures, allowing all families to benefit from this tax status.

Also Read: Budget 2025 | Tax breaks to spur spending, boost economy? 

Conclusion

It is not essential that we ape the procedures evolved in other countries, but we must attempt to adapt what has been tested and found efficient elsewhere while preserving the best in our own codes. We must certainly aim to create a more equitable and culturally aligned tax regime.

The author is partner at Nangia Andersen LLP, a tax consulting firm.

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