Moonlighting may have tax repercussions

Technology workers who are “moonlighting” have been warned by income tax authorities and chartered accountants (CAs) to be aware of the tax repercussions.

They have stated that any additional income from such activity should be disclosed in their tax forms.

Top IT organizations have recently expressed worries about moonlighting, or employees taking on additional tasks outside of their regular duties. Some, like Wipro and Infosys, have also terminated the services of some employees due to ethical concerns.

According to R Ravichandran, principal chief IT commissioner for Tamil Nadu, Puducherry, and Kerala who talked to ET, anyone receiving more than Rs30,000 in payment for a contract job (under Section 194C of the IT Act, 1961) or who pays a professional fee (under Section 194J) is required to withhold tax at source (TDS) at the appropriate rate.

The recipient of such payments must report such income in his or her tax returns and pay the corresponding tax rate. The TDS is also applicable if such payments to the same individual exceed Rs 1 lakh in a financial year under Section 194C.

Many professionals, mostly in the tech industry, have begun to consult chartered accountants and tax planners for guidance on how to handle their external income to avoid or lower their tax liability.

Tech workers want to know if the extra cash may be claimed as professional income lawfully.

When it comes to allowing employees to work part-time for other businesses while still being paid by their current employer, technology and software companies in India are divided.

Last month, Infosys made history by becoming the first software company in the nation to approve external jobs with managers’ permission in advance and under specific restrictions.

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