Tax authorities want IT professionals to declare income from ‘moonlighting’- QHN

Amid a debate on the ethical issues surrounding ‘moonlighting’, 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, according to a report in The Economic Times.

Several techies have already reached out to their tax planners, 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.

The concerns from tax authorities come at a time when there is an ongoing debate on how far ‘moonlighting’ by employees can be allowed. Some companies — like Wipro and Infosys — reportedly terminated the services of some of their employees over ethical issues. Others say they may allow their employees to take up gig work if these do not come in direct conflict with their primary jobs.

“Many people are interested in discussing or understanding this (issue) better,” Amarpal S Chadha, tax partner and India mobility leader, EY India, told ET.

Chadha added that not disclosing such income may lead to a mismatch in income reported by an individual versus the data available with the tax authorities, since Form 26AS, Annual Information Statement and Taxpayer Information Summary are “quite elaborate”.

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

“Given the advancement of technology, it will be very difficult to conceal the second earnings for long,” Prabhakar KS, CEO of Shree Tax Chambers, a Bengaluru-based tax consultancy firm, told the publication.

R Ravichandran, principal chief IT commissioner, Tamil Nadu, Puducherry & Kerala, explained that 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.