‘Declare Income from Moonlighting’: Income Tax Authorities to IT Professionals

Income from Moonlighting - Income Tax Authorities - IT Professionals - taxscan

In a significant move, the income-tax authorities have raised concerns about its tax implications for those who take up additional assignments outside their regular employment.

Cautioning technology professionals about the tax implications, the authorities have urged them to declare any income from ‘moonlighting’ in their tax filings. This is amid a debate on the ethical issues surrounding ‘moonlighting’. The extra income earned from such activity should be declared in their tax returns, they have said.

Several techies have already reached out to their tax planners and professionals, discussing with them how to declare this secondary source of income and how to minimise their tax burden. They are also trying to understand whether the extra earnings can be treated as professional income.

Reportedly, the Taxation experts said that the Income-Tax Department may initiate an enquiry if undeclared income is detected in future, possibly resulting in penalties

An individual or a company making a payment of more than Rs 30,000 to a person in return for a contract job (under Section 194C of IT Act, 1961) or pays a professional fee (Section 194J) are liable to deduct tax at source (TDS) at the applicable rate. The TDS will also be applicable if payments to the person exceed Rs 1 lakh in a financial year under Section 194C.

The recipient must declare such income in his or her tax returns and duly pay the applicable income tax rate.  A payee not deducting TDS or a recipient not declaring such income would amount to violation of the Income Tax law and invite action.

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