Why moonlighting professionals have come under Income Tax Department’s scanner

Have you been moonlighting? Did you earn additional income from a job apart from your regular employment but did not disclose it in your tax return? The Income-Tax Department has been sending notices to numerous professionals who failed to report additional earnings beyond their regular salaries in their tax returns, according to an ET report.

A substantial volume of notifications pertained to the financial years 2019-2020 and 2020-2021, according to informed sources quoted in the report. Moonlighting gained traction during the pandemic, especially within the IT sector, as remote workers sought supplementary employment alongside their primary jobs.
In various instances, income earned from supplementary employment – often referred to as moonlighting – was higher than the salary from the primary full-time occupation. Many of these concealed earnings were transferred digitally, including funds originating from foreign accounts. The tax department’s automated system effectively identified these unreported revenues during data analysis, the ET report said.

A senior official was quoted as saying that a large number of instances involving IT, accounting, and management professionals who were getting received monthly or quarterly compensation from multiple companies were detected. These professionals had only disclosed only their full-time job income in their tax filings. Initially, notices were dispatched to individuals whose annual undisclosed income ranged between Rs 5 lakh and Rs 10 lakh.
Instances of this nature were notably frequent during the fiscal years spanning 2019 to 2021, authorities confirmed. The department has issued over 1,100 notices thus far. In certain scenarios, companies themselves provided accurate Permanent Account Numbers (PAN) to the department, alerting them about employees engaged in such activities.
Although the analysis for the fiscal year 2021-2022 is pending, it is anticipated that the number of notices will increase. “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 aforementioned senior official explained. Officials are also investigating instances of cash payments.