The income tax department sends notices to individuals who earned extra money through moonlighting but failed to mention it on their tax returns. Moonlighting income can complicate tax calculations and taxpayers may have to pay additional taxes and interest
The income tax department is sending notices to people who earned extra money apart from their salary but failed to mention the amount while filing their income tax returns (ITRs), The Economic Times reported. The tax notices were sent to individuals who earned extra from the ‘moonlighting’. Over 1,000 notices were sent for the financial years 2019-2020 and 2020-2021, as per the report published in ET.
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.
Mumbai-based investment and tax expert Balwant Jain said that basically, 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,” Said Balwant Jain
“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.” said Abhishek Soni, CEO and Co-founder Tax2win.
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,” said Balwant Jain.
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,” said Archit Gupta, Founder and CEO, Clear.
Source: https://www.livemint.com/money/personal-finance/moonlighting-why-income-tax-department-is-sending-notices-to-these-taxpayers-11691479058870.html
© 2018 CA Chandan Agarwal. All rights reserved.