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Moonlighting - what does it mean and its inclusion in ITRs.

A lot of Notices are being sent to people by the IT Department who have income from sources other than their regular salary but haven’t disclosed the same in their ITRs.

In other words, they are being served to people who have been MOONLIGHTING and haven’t disclosed it.

What is moonlighting, you ask? We'll enlighten.

Well, moonlighting refers to taking on a secondary job in addition to one's primary job, usually after working hours. This helps in supplementing income, gaining new skills, and pursuing a passion. The Pandemic and the rise of the Work-from-home culture made this particularly popular.

But why has the Department been sending notices to people who have been moonlighting?

Are people receiving notices just because they moonlighted?

The answer is NO.

A senior official from the Department told Economic Times that “people are not getting tax notices for moonlighting, but for incorrectly declaring their income, when in some cases it is double of what they were getting from their salary”. The official went on to add that this has occurred mostly among IT, Accounting and Management professionals who declared income only from their full-time job in their ITRs, when they were also paid from two or more employers. Especially for the financial years 2019-20 and 2020-21.

The Department has been able to easily detect these undisclosed incomes by data scrutiny because most of the payments were made through online sources, while some were even paid by overseas accounts. Further, the Department will also be scrutinising receipts effected through cash.

In the first phase:

  1. individuals who had not disclosed income ranging between ₹5,00,000 to ₹10,00,000 were targeted.

  2. A total of 1,100 assessees have been served such notices till now and the number is expected to only go up as the Department prepared for additional scrutiny.

  3. Further, most companies themselves informed the department about their employees with proper PAN details, making it easier for the Department.

If you are someone who also moonlights, should you be scared? What do you need to take care of to not be an assessee-in-default? Allow us to simplify:

  1. Income from moonlighting is just another source that has to be reported in the ITR based on the employment status and nature of the work.

  2. If you are already employed somewhere primarily, the second job will need to be disclosed under “Salary”. And for all of you self-employed folks out there, it needs to be shown under “Profits and Gains from Business or Profession”. The tax rates applicable will depend on your slab tax rates you fall under.

  3. Remember to include it in the estimate given to your employer to appropriately deduct sufficient tax at source. This ensures that appropriate amounts are already deposited with the Department and brings transparency in your reporting of income. Routing your compensation through bank accounts will also help you to keep you out of the crosshairs of the Department.

But nonetheless, each case entails a different requirement. And that’s why we recommend you to get a free consult with our experts to know exactly what you need to do. It barely takes a minute for you to book through our calendar available on the homepage of our website. Not only do we help you save the most taxes possible, we hold your hand right beyond the return filing process to have your back in case you’ve been served a notice.

So yeah, the Department has been sniping for assessees who have not shown the receipts from moonlighting lately and now you know why.

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