In India, married couples have the option to file taxes jointly. Both spouses should be Indian residents for the financial year in question. However, it's important to note that joint filing is not mandatory, and individual filing is also allowed.
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Clubbing of Incomes
When filing taxes jointly, the income of both spouses is combined and treated as the total income for tax calculation purposes. This includes any income earned by the non-working spouse, interest income, rental income, capital gains, and other sources.
Exemption Limit
The basic exemption limit, which is the income threshold below which individuals are not liable to pay income tax, applies to each individual separately. The basic exemption criteria for anyone under 60 as of the current tax year is Rs. 2.50 lakh. If one spouse falls below this threshold, they would not have a tax liability individually.
Optimal Utilization of Exemptions and Deductions
Joint tax filing allows for the optimal utilization of exemptions and deductions available under the Income Tax Act. For example, deductions under Section 80C for investments in specified instruments, such as life insurance premiums, Public Provident Fund (PPF), and tax-saving fixed deposits, can be utilized to reduce the combined taxable income. Additionally, deductions for health insurance premiums under Section 80D and interest on home loans under Section 24 can be claimed to further reduce the overall tax liability.
Tax Calculation and Filing Process
When filing taxes jointly, both spouses should provide their income details, deductions, and exemptions in the tax return form. The tax liability is calculated on the combined income, and the applicable tax rate is applied accordingly. It's important to accurately report all income sources, investments, and deductions to ensure compliance with tax regulations.
Joint tax filing allows for the optimal utilization of exemptions, deductions, and tax benefits available under the Income Tax Act. By combining the incomes of both spouses, you can potentially reduce your overall tax liability and optimize your financial situation.
Look up more articles here for a smooth first time tax-filing process. All the best!
