As the dust settles on the recently concluded tax filing season, the income tax department in the country has embarked on a new phase – issuing notices to professionals who have earned supplementary income beyond their regular salaries but have not disclosed these additional earnings in their tax returns. This move comes as part of the department’s efforts to ensure comprehensive income reporting and fair taxation.
The Noteworthy Notices
A recent media report dated August 8 revealed that approximately 1,100 notices have been dispatched by the income tax department. These notices primarily pertain to the financial years 2019-2020 and 2020-2021. The intriguing aspect is that these professionals’ income derived from moonlighting activities, essentially secondary employment pursued alongside full-time commitments, often exceeded their primary salaries.
The Mechanism of Detection
The income tax department’s ability to unearth these undisclosed incomes owes itself to meticulous data scrutiny. Many of the payments linked to moonlighting endeavors were conducted through online channels, with a portion originating from overseas accounts. This digital footprint facilitated the identification of cases where additional income streams remained unreported.
Moonlighting’s Taxing Impact
A senior official familiar with the matter shared, “We have identified numerous instances involving IT, accounting, and management professionals who were receiving regular monthly or quarterly payments from two or more employers. Surprisingly, they were only declaring income stemming from their primary full-time job in their tax filings.” This pattern of selective income declaration has prompted the issuance of notices.
Notice Parameters
The initial batch of notices has been dispatched to individuals whose unreported annual earnings averaged between Rs 5 lakh and Rs 10 lakh. It is noteworthy that such cases were more prevalent during the fiscal years spanning from 2019 to 2021. Some companies themselves have reported instances of their employees engaging in moonlighting, accompanied by valid Permanent Account Numbers (PANs).
Future Outlook
Looking ahead, the income tax department is gearing up to process data related to the financial year 2021-22. As a result, the volume of notices issued is anticipated to rise. A senior official clarified, “The issuance of tax notices is not solely for engaging in moonlighting but rather for inaccurately reporting income, particularly when it is substantially higher than the declared salary.”
Exploring Cash Transactions
In addition to scrutinizing digital transactions, the income tax department is also delving into cash payments associated with moonlighting activities. This comprehensive approach aims to create a transparent and equitable taxation framework.
The Pandemic Influence
The surge in moonlighting, particularly noticeable in the IT sector, gained momentum during the pandemic, especially as remote work became the norm. Individuals sought supplementary income avenues to bolster their financial stability during uncertain times.
The income tax notices sent to moonlighting professionals underscore the government’s commitment to enforcing accurate income reporting and fair taxation practices. By addressing instances of underreported income, the income tax department aims to maintain the integrity of the tax system while encouraging transparent financial disclosures. As the fiscal landscape continues to evolve, both professionals and employers are urged to ensure compliance with tax regulations and reporting requirements.
