Are You a Moonlighting Employee? Well, Then You Have to Pay Taxes


by Satavisa Pati November 25, 2022

Moonlighting in IT sector is growing and it might even make you pay taxes

The moonlighting issue has come to the fore in recent weeks and drawn varying responses over the practice, particularly in the IT sector. Moonlighting involves taking up a second job while still being on a company’s payroll. While such assignments or jobs can bring in additional income, the Income Tax (IT) authorities have cautioned moonlighting employees that it can have some tax implications, reported The Economic Times.

The principal chief IT commissioner, Tamil Nadu, Puducherry and Kerala, R Ravichandran, said that any company or individual pays over ₹ 30,000 to a person for a contract job or pays a professional fee is liable to deduct taxes at source (TDS) at the applicable rate. According to Section 194C of the Income Tax Act, any individual who gives a fee to a residential individual for carrying out contract work must deduct TDS.

In addition, the section states that if the TDS deduction is taking place as per the provisions of Section 194C of the IT Act, then it should be done “at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier”. Section 194J of the IT Act states that a person is liable to deduct TDS at a 10 percent rate while making certain types of payments of more than ₹ 30,000 to a resident. TDS must also be deducted when the aggregate amount of the payment exceeds ₹ 1 lakh in a financial year.

Payments here include the amount charged as royalty, professional services fee, technical service fee, or non-compete fee under Section 28(VA) of the Income Tax Act. The tax authorities have urged employees to declare any additional income in their tax returns and pay the applicable tax. The report added that if such income is detected later, the IT department can impose penalties and initiate an inquiry under Section 148A of the IT Act

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