Moonlighting employees under tax scanner

The income-tax department has sent notices to many professionals who have earned income outside their regular salary but did not declare in their tax returns. Most of the notices issued were for financial years 2019-2020 and 2020-2021, people familiar with the matter told ET.

In a number of cases, the income from the so-called moonlighting, or job outside full-time employment, was higher than the regular salary.

As most of the payments were made online and some were received from overseas accounts, the tax department's system was able to detect these undeclared incomes easily during data scrutiny.


"We have found a large number of instances of IT, accounting and management professionals who were getting payment 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.

In the first phase notices were sent to individuals where the average undeclared annual payments ranged between ₹5 lakh and ₹10 lakh.

Such instances were more during fiscal years 2019-2021, officials said. The department has so far sent notices to more than 1,100 people.

In many cases, companies themselves informed the department about their employees engaged in such practices, with proper Permanent Account Numbers (PAN), they said.

The department has yet to analyse data for financial year 2021-22 and expects the number of notices to go up further.

"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. Officials said they are also looking into cases where payments were made in cash.

Moonlighting became popular during the pandemic, especially in the IT sector with people working from home taking up work in addition to their full-time jobs.