There is very little time left to file ITR for the financial year 2022-23. The deadline for filing income tax return is 31 July 2023, which is now just 10 days away. Till now more than 3 crore taxpayers have filed income tax return, but still crores of people have not filed the return. If you haven’t filed your return till now, then don’t delay any longer.
The whole equation of moonlighting
The main reason behind the delay in filing income tax return is that many people are still not able to file their return on their own. This usually happens because the taxpayer does not know how to show income from different sources. Today we are going to tell you about a similar situation, which is known as moonlighting in the corporate world.
What is moonlighting and why do people do it
First of all, let’s understand moonlighting. Apart from the job, the work you did for additional income is called moonlighting. In simple words, suppose that you work in a company. Your duty is for 9 hours. You return home after finishing your office work. After that work as a freelance for another company or vendor. Here the work done by you after coming home is called moonlighting and the income earned from it is income from moonlighting.
There is no special provision in the income tax law for moonlighting, but it does not mean that this income will not be taxed. Tax on extra income depends on the type of income. Means it is salary income, professional fees or business income. The same formula will be applicable here as well.
Tax will depend on this
If the earnings from moonlighting are received in the form of salary, then it will have to be shown in the return under the head ‘Salary’ along with the salary of the main company. The income made after deduction and exemption will have to be taxed at the rate in which the tax slab falls. You will be able to claim deductions like standard deduction, 80C, 80D only once.
If the income from other work is in the form of freelance work or professional fees, then it will come under the purview of income from business and profession. This will be taxed like income from business and profession.
Which ITR form to choose
If you are getting income from moonlighting as salary, then it will have to be shown in ITR-1. If the total income is more than Rs 50 lakh, there is any kind of capital gain, then ITR-2 form will be applicable. Similarly, if there is additional income from business or professional fees and opt for the Presumptive Tax Scheme (PTS), ITR-4 will have to be filed. This income can be shown in ITR-3 if the total amount received as professional fees is more than 50 lakhs.
This is how to get maximum tax benefits
If you want to avail maximum tax benefits, then earnings from moonlighting should be shown as professional fees. Its advantage is that the expenditure incurred in this work can be shown as an expense. Apart from this, after calculating tax on income, you should pay all four installments of advance tax on time.
Don’t make the mistake of hiding income
In case of moonlighting, the company or vendor deducts tax ie TDS while making payment. This amount is deposited with the government. This means that the information about your earnings reaches the government. In such a situation, instead of hiding the earnings from moonlighting, show it in the return and pay the tax, otherwise the notice of the Income Tax Department may come. This can be considered tax evasion.
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