Tax dept cracks down on undeclared moonlighting in ITR filings: How to respond to such a notice

 In a significant move aimed at curbing tax evasion, the Income Tax Department has reportedly started sending notices to individuals who are engaging in moonlighting activities but have not disclosed them in their Income Tax Return (ITR) filings. Moonlighting refers to the practice of working a second or third job in addition to primary employment, often without informing tax authorities.

According to reports, the notices are being sent to individuals whose primary source of income is their regular employment, but who have neglected to mention their supplementary earnings in their ITR filings.

“Moonlighting became prevalent during the COVID-19 times, especially among workers engaged in the IT sector mainly to supplement income-earning capabilities. Interestingly, there is no specific restriction for engaging in moonlighting under the Income-tax Act, 1961 (“the Act”). Rather, the act contains provisions where an individual has received moonlighting income as salary,” said Yeeshu Sehgal, Head of Tax Market at AKM Global, a tax and consulting firm.

Taxpayers who may have omitted their moonlighting earnings from their ITR filings are advised to take immediate action to rectify the situation. Consulting with tax professionals and seeking guidance from the Income Tax Department can help individuals navigate the process of accurately reporting their additional income and fulfilling their tax obligations, experts say.

If a notice has been received, a taxpayer should read and assess it carefully and if they have declared all their income diligently, then it must be stated in the reply to such notice with relevant proofs.

“It must be noted that freelancing income is income from business or profession and therefore needs to be reported in either ITR-4 or ITR-3. If someone makes a mistake in choosing the ITR form, too, there is a probability of getting notice from the income tax department,” Sujit Bangar, Founder at Taxbuddy.com, an income tax filing platform, said.

Source link: https://www.cnbctv18.com/personal-finance/itr-filing-income-tax-return-undeclared-moonlighting-notice-how-to-respond-penalty-17475041.htm/amp

Website link: https://www.taxbuddy.com/

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