Moonlighting has become a well-known term after several examples of tech professionals from large companies indulging in it. The term refers to having one’s primary job as well as a second job, usually in secret. While there can be financial and career benefits to a side hustle, your side hustle can also be liable for some hefty taxation. It is essential to know what kind of taxes are applicable on your income from Chandni to avoid levying penalty by the Income Tax Department later.
According to The Mint, income derived from business or professional services can be taxed under the head ‘PGBP-Profits and gains from’. Business and head of the profession. While business expenses, such as travel expenses, can be deducted from this income, the remaining amount will be offered for tax at the applicable slab rates. If the tax payable exceeds Rs 10,000, the taxpayer has to pay advance tax in four installments of 15 per cent, 45 per cent, 75 per cent and 100 per cent.
On the other hand, if the second job falls under one of the businesses listed in section 44ADA of the Income Tax Act, and the income is less than Rs 50 lakh, the taxpayer can choose to pay tax on only half of his income. In this case, however, they cannot claim the expenses as they have already received a flat deduction of 50 per cent. Also, they will have to pay the last installment of advance tax on March 31 itself.
Tax calculations become more complicated if taxpayers receive their moonlight income in the form of salary. This guarantees the person giving moonlight to be extra careful while filing the return.
To deduct tax deducted at source (TDS), employers usually draw the figure of estimated taxable income.
For example, if a person is receiving a salary from both their jobs, they are on the payrolls of two employers. Both the employers will consider standard deduction of Rs 50,000 and deduction under 80C. However, both the employers will determine the total tax liability based on the lower tax slab. This means that TDS by each employer will be less than the entire tax liability of the moonlighting employee.
To avoid any additional penalty or charges, the employee has to advance the tax installments towards the total liability at prescribed intervals.
If you’re engaged in moonlighting, seek advice from a professional on how you can best manage your tax payments.
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