Q: July 31 is the last date for filing it returns. But a lot of people use the two year extended window to file their returns. Is this advisable? And what are the implications of missing the July 31 deadline?

A: One should file income tax return before the deadline rather than waiting for the deadline; file it as soon as possible.

If one files the income tax return late, that is after the deadline of July 31 then a penal interest is required to be paid. The penal interest is equal to 1 percent of the tax due whether one day or one month, 1 percent per month or part of the month, the penal interest would be payable. Therefore, I strongly recommend all taxpayers of India to file income tax return in time.

Those who have got loss etc, they cannot take the benefit of carry forward of the loss, especially if the tax return is filed beyond July 31.

If no tax is due and return is delayed then one can file the return after July 31. No penalty, no penal interest but only in a situation when no tax is due.

Q: Suppose there is any kind of unpaid tax pending because of variety of reasons like if one is changing employer or have any kind of other source of income etc then is there any penalty if one does not file returns within July 31?

A: Yes, if one does not file return before July 31 then some taxes are due. Reasons are not concerned, whether change of employer or some other income, tax on other income, interest income and property income. The fact remains that as on July 31 some tax is outstanding. On that tax the net tax payable amount penal interest will be the required to be calculated and to be paid. That means even if return is delayed for two days, for example if one files in the month of August even then penal interest will be charged for the whole month. Therefore, file the return in time, pay the taxes now and file the return before July 31.

Caller Q: I am holding unlisted company shares for last 20 years for which there is a buyback offer by an American multinational company. Can I pay long-term capital gain tax without indexation at the rate of 10 percent?

A: You will not be able to take advantage of 10 percent tax rate as that is applicable only for listed company. You have to calculate the cost based on cost, inflation index and then make payment of 20 percent tax and you can save tax also by making investment in real estate.

Caller Q: What is the right time to declare interest on the bank fixed deposits (FDs)?

A: On accrued basis declare your income from bank FDs etc. This means you would have a cumulative fixed deposit receipt and bank will give the details, certificate and details of accrued interest. Therefore, best is to declare accrued interest in the income tax return but still the choice lies with the taxpayer to take whichever path he would like to chose. One can go for cash system of accounting or mercantile system of accounting but follow one system consistently, for example you may declare accrued interest on year-to-year basis or you may declare the entire interest income at one go in the year in which you receive the actual amount of the interest. However, it's better to go in for declaring on accrued bases so it is easy for you to take advantage of the tax deducted at source also.