Taxability On Moonlighting: Must Know

Recently, a big MNC has fired employees for Moonlighting whereas some have allowed Moonlighting subject to certain conditions. This has started controversies among the corporates & employees, raising many questions about moonlighting, regarding its legal position, and tax implications including tips on how to do it (legally). In this article, we will focus on Taxability On Moonlighting.

We will, in this article, understand what is moonlighting and what are the tax implications on it. This is for sure that moonlighting is not illegal. It is purely legal though there is no separate mention about it in income tax regarding its legality. Let’s understand the taxability of it.

What is it?

Moonlighting means taking up a side job while still in employment with the primary employer. Often, the side job is taken without the primary employer’s knowledge.

The side job may be outside the working hours of the primary job i.e. at night or on the weekends. Basically, moonlighting is when a person works more than one job simultaneously.

Tax Implications on Moonlighting

If the moonlighting income is received as salary, then both or all the employers will consider the standard deduction of Rs. 50,000 and 80C deductions to calculate the individual tax liability (however Income Tax Act, 1961 allows fixed amount of standard deduction & fixed limit of 80C irrespective of number of employers).

This could lead to lesser TDS deduction by each employer than the taxpayer’s actual aggregate tax liability.

If you are choosing to show your position as an employee (during the filing of your Income Tax Return) at both of your works, then it is recommended to pay advance tax to avoid penalty and interest under Section 234.

If the moonlighting income is received as professional fees, taxpayers can claim the expenses incurred for their business and profession such as meeting expenses, conveyance, depreciation on a laptop, etc. as a business expense and deduct it from the professional fees offered for tax.