Moonlighting for additional income? Check out its tax implications

Moonlighting is the new buzzword which has been floating in the IT industry recently. It is referred to holding a second job alongside one’s primary job, usually secretly. About 300 employees were terminated in September by Wipro after it found out that they were working directly for one of its competitors. Following the suit, Infosys warned its workforce by sending an internal note asking for “no double lives”. It made it very clear that dual employment was not permitted and its violation may lead to termination of employment. IBM India also called it an unethical practice. However, Tech Mahindra backed the concept and stated that it is necessary to keep changing with the times. There could be financial and career benefits of having a side job, however, it could also be liable to some heavy taxation. It is crucial to know what kind of taxes are applicable to your income from moonlighting to avoid getting penalised by the Income Tax department later on. Income derived from business or professional services can be taxed under PGBP (Profits and Gains from Business and Profession). While business expenses like travel expenditures, can be reduced from this income, the rest of the amount will be given to tax at applicable slab rates. If the tax payable is in excess of Rs 10,000, the taxpayer needs to pay advance tax in four installments. In case, the second job comes under one of the professions listed in section 44ADA of the Income Tax Act, and the income is below Rs 50 lakh, then the taxpayer can opt to pay tax on only half of their income. However, in this case, they cannot claim the expenses because they have already received a flat 50 percent reduction. Also, they need to pay only the last installment of advance tax on 31 March. Tax calculations get more complex if taxpayers earn their moonlighting income as salary. This warrants that individuals who are moonlighting to be extra careful when filing their returns. To deduct Tax Deducted at Source (TDS), employers usually pull up an estimated taxable income figure. For instance, if an individual is receiving a salary from both of his/her jobs, then that person is on the payrolls of two employers. Both employers are going to consider a standard deduction of Rs 50,000 and deductions under 80C. However, both employers will be determining the total tax liability based on the lower tax slabs. This implies that the TDS by each employer is going to be lower than the whole tax liability of the moonlighting employee. To find out the total income tax you must pay, consult a professional about the same. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.