Tax Authorities Shine Spotlight on Moonlighting Employees in 2023.

The income-tax department is cracking down on professionals who have earned extra income through moonlighting but failed to report it in their tax filings. This move has led to the issuance of notices for the financial years 2019-2020 and 2020-2021, according to sources familiar with the situation as reported by ET.

Many of these notices pertain to instances where the earnings from moonlighting, which refers to secondary jobs taken alongside full-time employment, surpassed the individual’s regular salary. The rise of digital payments and international transactions has made it easier for the tax department’s systems to detect these unreported earnings during data analysis.


A senior official stated, “We have identified numerous cases involving IT, accounting, and management professionals who were receiving monthly or quarterly payments from two or more companies. However, they were only declaring income from their primary full-time job in their tax returns.”

The initial phase of notices was sent to individuals who had undisclosed annual payments ranging between ₹5 lakh and ₹10 lakh. Instances of such underreporting were particularly prevalent during the fiscal years 2019-2021, leading to notices being sent out to over 1,100 individuals thus far.

Interestingly, some companies themselves alerted the tax department about their employees engaging in such practices, providing valid Permanent Account Numbers (PAN) for verification. The department is yet to analyze data for the financial year 2021-2022, and it’s anticipated that the number of notices may increase further.

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“The intention behind these notices isn’t just about moonlighting; it’s primarily about incorrect income declaration. In some cases, the unreported income is even double the amount of their official salary,” the senior official emphasized. The officials are also investigating cases involving cash payments.

The trend of moonlighting gained momentum during the pandemic, especially within the IT sector. With remote work becoming prevalent, many individuals took on additional work alongside their full-time commitments. As the tax authorities continue their efforts to ensure accurate income reporting, professionals are advised to diligently include all their income sources in their tax returns.

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