Share application money

This query is : Resolved

CA.Varalakshmi.M

CA.Varalakshmi.M (Querist)
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04 January 2013 Hello experts,

We have received share application money in US$.but we have not convereted that money into shares. Now we want to revert back that application money with interest. do I need to calculate interest on US$ or indian rupees. Suppose we have received US$ 1000 and we have converted that amount into 50000/- do we need to calculate int on US$1000 or rs.50,000/- Please clarify.

CA.Varalakshmi.M

CA.Varalakshmi.M (Querist)
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09 January 2013 Hello experts,

Can any body answer.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 July 2025 Hey! Here’s the clarification on your query about **interest on share application money received in foreign currency (USD) but refunded in INR:**

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### What to consider for interest calculation on refunded share application money?

1. **Currency of original receipt:**
Since the application money was received in **USD 1000**, this is the principal amount actually paid by the applicant.

2. **Conversion to INR:**
You converted USD 1000 into INR 50,000 (assumed for example purposes).

3. **Interest calculation:**

* Interest should be calculated on the **amount in the currency in which money was actually received**, i.e., **USD 1000**.
* When refunding, if you refund in INR, calculate interest on USD 1000 and then convert that interest amount into INR at the **prevailing exchange rate** on the date of refund.

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### Why?

* The **obligation is to pay interest on the amount actually received** by the company.
* The value in INR fluctuates due to exchange rates, so calculating interest on INR 50,000 (which may change with exchange rate) can be misleading.
* To be fair and transparent, interest is computed on the original foreign currency amount.

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### Practical Steps:

* Determine the rate of interest agreed upon (if any), or statutory rate.
* Calculate interest on **USD 1000** for the period money was held.
* Convert the interest amount to INR at exchange rate on refund date.
* Refund principal (USD 1000 equivalent in INR) + interest amount (converted INR).

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### Summary:

| Step | Explanation |
| -------------------------- | ------------------------------------- |
| Principal Amount | USD 1000 (actual amount received) |
| Interest Calculation Basis | On USD 1000 |
| Refund Amount | Principal + Interest converted to INR |

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If you want, I can help draft a sample calculation template or letter for refund including interest. Would that be useful?

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