When you earn money from freelancing work, then never make this mistake that show your entire earning as income. People earning from freelancing can also show a part of their income as expenses. This can include data charges, electricity bills, subscription charges for software etc.
There is a lot of discussion about Moonlight policy in the job market these days. While many companies have been soft about doing two jobs simultaneously, many companies have openly opposed it. However, here we will talk that if you do another job (Moonlighting) under the Moonlight policy, will you have to pay extra income tax.
What is Moonlighting?
By the way, the moonlight policy is being mentioned the most among the employees of new generation tech companies and IT companies. While many software professionals are seeing this trend as a new opportunity, many also have a lot of concerns. Understand in common language, Moonlighting means doing one side income or other income while already working somewhere.
Talk about tax on side income
Now let’s talk about tax on side income from moonlighting. If you are a salaried employee, then you have to fill Income Tax Return Form ITR-1. Whereas if your income is from freelancing work, then you have to fill ITR-4 form, because this income is considered as Income from Profession.
Taxes on Which Expenses You Can Save
When you earn money from freelancing work, never make this mistake of showing all your earnings as income. People earning from freelancing can also show a part of their income as expenses. Expenses that you need to do freelancing work. However, for this your total freelancing income should not exceed Rs 50 lakh.
This may include data charges, reasonable cost of using electricity, subscription charges for software and other tools, etc. An individual can claim income up to 50% of his total freelancing income as taxable income.
For example, if your freelancing income is Rs 16 lakh, then you can show your taxable income as Rs 8 lakh. In such a situation, if your income from salary is Rs 20 lakh, then your total income will be Rs 28 lakh.
How much will be the tax on moonlighting?
According to the Business Today report, if you are doing moonlighting along with your salaried job, then you should calculate your second job i.e. freelance income on a quarterly basis. After paying the credit of TDS, if you have any liability according to the tax slab, then only you will have to pay extra income tax, failing which no tax will have to be paid.
One more thing, if your total income is Rs 28 lakh as in the above example, then you will also get the benefit of exemption under 80C and 80D as per Income Tax Law.
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