They said that the additional money received from such work should be declared in the tax return.
Top tech companies have voiced their concerns about moonlighting – or taking on extra responsibilities by employees outside of their regular jobs – with some like Wipro and Infosys also scrapping their jobs. some services due to ethical issues.
A person or a company that pays more than Rs 30,000 to an individual in return for contract work (under Section 194C of the IT Act, 1961) or pays professional fees (Section 194J) can to deduct tax at source (TDS) at applicable rates, said R Ravichandran, Chief IT Commissioner, Tamil Nadu, Puducherry & Kerala. TDS is also applicable if such payment to an individual exceeds Rs 1 lakh in a financial year under section 194C. The recipient must declare this income in his tax return and pay the applicable tax rate.
Many professionals, especially technology workers, have begun to seek the advice of accountants and tax planners on how to bring in foreign income to avoid or reduce their taxes.
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Generally, the corporation’s tax office sends out tax returns in December or January.
Tech workers want to know if the extra money can be legally reported as professional income.
A payee not deducting TDS or a recipient not declaring such income may be a violation of the IT Act and invite action.
“A lot of people are interested in discussing or understanding it (external income issue) better,” said Amarpal S Chadha, tax partner and India mobility leader. EY India.
“Considering that Form 26AS, Annual Information Statement and Summary of Taxpayer Information is very complex to cover the payments received and taxes deducted in a financial year , non-disclosure or non-reporting of such income in the tax return will lead to a discrepancy in the income reported by the individual versus the data available in the department. tax affairs,” said Chadha.
This income can be treated as non-reporting or misreporting of income by the tax authorities, resulting in interest or applicable penalties, he added.
If undisclosed income is found in future, the Income Tax department will investigate under Section 148A of the IT Act and it may attract penalties, experts said. .
“Given the advancement of technology, it will be very difficult to hide their secondary income,” said Prabhakar KS, CEO of Shree Tax Chambers, a Bengaluru-based tax consultancy firm.
Prabhakar said the government should step in to address some of these issues in the labor code, including the definition of moonlighting, instead of leaving it to the industry because this will prevent litigation, and mistrust between employers and employees, he added.
“An employee may engage in non-competitive work to increase his income and the authorities may have nothing to do with it,” said Guruprasad Srinivasan, CEO of staffing solutions provider Quess Corp. a legal system that allows employees to disclose such external contacts, and the government should reduce the employer’s financial commitment to such employees.
India’s technology and software companies are divided over whether to let workers hurt the moon for other companies while still on the payroll.
Infosys became the first software company in the country last month to clear outsourcing gigs with prior management approval, subject to certain conditions.
India’s largest IT company by revenue, Tata Consultancy Services, has called the practice an “ethical issue” and a violation of employee contracts.
Staffing companies and outsourcing companies say that in 3-8% of cases, employees have done similar work in addition to their first job.