Moonlighting shines brighter than salary under tax scanner, I-T sends 1,100 notices

Moonlighting employees come under IT department's radar

The income tax department has begun issuing notices to professionals who earned more than their regular salary but did not declare the extra income on their tax returns.

Most of the 1,100 notices issued so far pertained to the financial years 2019-2020 and 2020-2021, the Economic Times reported on August 8, quoting people familiar with the matter. The income from moonlighting, or working outside of full-time employment, was often found higher than the regular salary, they said.

Moneycontrol could not independently verify this development.

The tax department was able to detect these undeclared incomes on data scrutiny since most of the payments were made online and some were received from overseas accounts, the report said.

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

First phase notices were sent to individuals whose undeclared annual payments averaged between Rs 5 lakh and Rs 10 lakh, as per the report. In fiscal years 2019 to 2021, such instances were more frequent, officials said.

A number of companies informed the department that their employees were engaged in such practices, with proper Permanent Account Numbers (PANs).

For the financial year 2021-22, the department is yet to analyse data and expects that the number of notices will rise. “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 senior official quoted earlier said. Cash payments are also being investigated, officials said, as quoted by ET.

During the pandemic, moonlighting became popular in the IT sector, especially for people working from home.