Income Tax Notice on Moonlighting: The Income Tax Department has recently sent notices to some people who were moonlighting along with their jobs. This notice is between 2019-2020 and 2020-2021. The Income Tax Department found that there are many employees who had filed income tax returns on their regular salary but their income was more than their regular salary from different sources. That is, such employees who were earning income through moonlighting but were not giving information about it to the Income Tax Department.
What is Moonlighting?
Moonlighting means taking up another job in addition to one’s primary employment. The second job is typically taken without the employer’s consent at their regular job. The debate around moonlighting grabbed headlines in the IT industry ever since Wipro Chairman Rishad Premji red-flagged the issue.
moonlighting is when a person receives a salary from two places, and taxpayers are expected to mention the same while filing their ITR. He further added that ‘income tax laws do not forbid you from working at two places’.
“Project Insight by the income tax department has the latest data analytics which helps the department to identify those tax evaders whose income tax return filing and expenses don’t match with what they have shown up
Why income tax department is sending notices to Moonlighters?
Many professionals earned extra money on top of their regular salaries (also known as moonlighting income), but they forgot to mention these earnings when they filed their taxes. The tax authorities have now sent notices to remind them to include this extra income. This highlights how important it is to be honest and complete when reporting earnings for taxes.
Section 148A of the Income Tax Act
In Budget 2021, the government introduced Section 148A in the Income Tax Act. Explaining this clause, Balwant Jain said that if the income tax officer receives some information that the taxpayer has escaped income for any assessment year on which tax is payable. “Under section 148A, the assessee gets a chance to be heard by the officer
Tax implications from moonlighting
The income from moonlighting might result in complicated tax situations that the taxpayer needs to be aware of.
“If taxpayers receive their moonlighting income as salary, it can complicate the tax calculations and the taxpayer may have to be extra careful while filing their returns. For deducting TDS, employers draw up an estimated taxable income figure. In such an estimation, both employers consider the standard deduction of Rs. 50,000, whereas the taxpayer can claim it only once. They may also consider the 80C deduction, which may exceed the maximum limit of ₹1.5 lakhs in total. While filing taxes, the taxpayers will have to make these changes and bear the brunt of additional taxes and interests. To avoid this, the taxpayers must compute the total taxes, subtract the tax deducted(TDS) by the employer and pay the balance as advance tax instalments