ITR Filing 2023-24: ITR forms to be filed by Moonlighter having Professional Income along with Salary

Moonlighting is the practice of working two or more jobs at the same time, usually outside of regular working hours.

The phenomenon of side hustles has grown significantly in recent years. This trend has been fuelled by the rising availability of remote job options, particularly since the breakout of Covid-19. The switch to work-from-home arrangements not only gave people more flexibility and time but also stimulated the development of new skills and the better use of technology.

Furthermore, as businesses adjusted to the new normal, they began to appreciate the positive benefits and potential of remote work arrangements.

Incomes of Moonlighters

Moonlighters frequently earn a regular salary and revenue from gigs or freelance income. Freelance income is classified as ‘income from business and profession.’

This classification enables individuals to claim expenses including stationery, travel, and data charges as business and professional expenses rather than ‘income from other sources.’

ITR Filing for Moonlighters

Yes, in this case, one is required to file the Income Tax Return (ITR) and show the income earned from freelancing along with salary income. But can we use ITR-1 to file the return? The answer is no.

Choosing the Correct ITR Form

Since the income is considered under ‘income from business and profession’ they cannot use ITR Form 1 or 2. Instead, they must pick between ITR-3 and ITR-4, which are for individuals with business or professional income.

ITR-3 is for individuals with business income. Taxpayers having eligible profession under presumptive Taxation Scheme can file a more simple return, i.e., ITR-4.

Conditions for selecting ITR-4

• Taxpayer cannot be Director
• Taxpayer cannot hold shares of Unlisted Entity
• Agriculture Income should not be more than Rs. 5000
• Taxpayer cannot own more than one residential property
• Total Income should be upto Rs. 50 L
• Taxpayer should not have deferred Tax on ESOPs from Startup
• Refer Income Tax Rule 12 for more restrictions in choosing ITR-4

Moonlighters who worked as consultants and earned less than Rs.75 lakh receipts can also use the presumptive tax system, provided that no more than 5% of their income was received in cash (outside of banks). Else Limit on professional receipts is Rs. 50,00,000.

Under this approach, 50% of gross receipts will be deemed taxable income.

Taking care of GST Aspect

In case your professional receipts are more than Rs. 20,00,000, one need to apply for GST Number as well and pay GST and file GST Return.

Opting Old Tax Regime – File Form 10-IEA

“The new tax regime lowers tax rates, but taxpayers must forego tax benefits for HRA and deductions under Chapter VIA (for qualifying investments such as PPF or eligible donations). It is possible that individuals with considerable tax benefit claims would be better off under the old tax regime,” according to the report.

Budget 2023 declared that the new tax regime would become the default tax regime.

Taxpayers with “income from business or profession” who choose to file their tax return under the old regime must submit Form 10-IEA online by the income tax return’s due date.

Salaried taxpayers who do not have any business or professional income are not required to file this form. Moonlighters with ‘income from business or profession’ must file Form 10-IEA if they want to continue under the old regime.

In moonlighters case, the old regime will continue in the coming years as well. If they want to choose the new tax regime again in the following year, they can, but only once.