Taxman turns focus on moonlighting

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Those who are indulging in moonlighting and not declaring it to the Income Tax Department beware. For taxmen are sending notices to many professionals who they suspect have done so for FY20 and FY21, The Economic Times said in a report.

More than 1,100 notices have been dispatched so far. Most of the instances took place between FY19 and FY21.

This might be the tip of the iceberg since the IT Department is yet to take up scrutiny of FY22. Officials expect the instances of moonlighting to rise in the subsequent years.

Moonlighting refers to the practice of working for a second job or launching a business besides one’s primary job. The concept is not at all illegal in India where many do it to supplement their income. However, the income from such secondary job/business are subject to the Income Tax Act and should be reported to the department.

The term gained currency during the pandemic, thanks to the IT professionals who could work from home and took up projects outside their regular job to supplement their income.

“We have found a large number of instances of IT, accounting and management professionals who were getting payment monthly or quarterly from two or more companies but were declaring income only from their full-time job in their income tax returns,” an Income Tax official told the newspaper.

The report said that the IT Department has found out that in many cases the income from such secondary sources is higher than that from the primary source. The IT Department’s job was made easier since these payments were received online either from within the country or abroad.

Notices were sent to those who received income between Rs 5 lakh and 10 lakh from secondary sources. However, officials indicated this is the first phase and such inquiries will continue from the department.

In many instances, the companies that paid these professionals informed the IT Department about such association with PANs and other details.

Officials clarified that notices were not being sent for moonlighting but for not properly disclosing their income. They are also looking into instances where payments were made in cash.