Moonlighting, the practice of holding multiple jobs, has surged in popularity, especially with the rise of remote work opportunities post-Covid-19. The flexibility of working from home has enabled individuals to pursue side gigs, acquiring new skills and optimising their time. Companies, too, have embraced this trend, recognising the benefits of remote work.
Moonlighting Incomes
Moonlighters typically earn a mix of regular salary and gig income, categorised as ‘income from business and profession.’ This classification allows for expense claims on items like stationery, travel, and data charges, unlike ‘income from other sources.’
ITR Filing for Moonlighters
Lubna Kably, in a recent news report, highlighted the importance of choosing the correct income-tax return form and meeting compliance requirements, especially for those opting for the old tax regime.
‘Salaried employees and taxpayers not requiring a tax audit must file their returns for fiscal 2024 by July 31. Late filing incurs a penalty of ₹5,000 (₹1,000 if income is below ₹5 lakh). Additionally, carrying forward losses, such as from securities sales, is denied,’ the report noted.
Choosing the Right ITR Form
For many moonlighters, gig earnings are considered business or professional income. They must use ITR-3 or ITR-4, not ITR-1 or ITR-2.
ITR-3: For individuals with business income.
ITR-4: For those with taxable income up to ₹50 lakh under the presumptive tax regime, with business income. Consultants earning less than ₹75 lakh can opt for this if no more than 5% of their income was in cash. In this scheme, 50% of gross receipts are considered taxable. Note: ITR-4 cannot be used if there is more than one house property.
Opting for the Old Regime
‘The new tax regime offers lower rates but eliminates benefits for HRA and Chapter VIA deductions (e.g., PPF or donations). Taxpayers with significant claims might prefer the old regime,’ the report stated.
The 2023 Budget made the new tax regime the default. Taxpayers with ‘income from business or profession’ who prefer the old regime must file Form 10-IEA online before the ITR deadline.
Chartered accountant Ketan Vajani said, ‘Salaried taxpayers without business or professional income need not submit this form. Moonlighters with such income must file Form 10-IEA to opt for the old regime, which will then continue for subsequent years. They can switch back to the new regime once.’
Amarpal Singh-Chadha, tax partner and India mobility leader at EY-India, warned, ‘If taxpayers with business or professional income don’t file Form 10-IEA, the new regime will apply, and all claimed tax benefits will be denied.’
Stay informed and choose wisely to ensure a smooth and penalty-free tax filing experience.
