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.
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:**
---
### 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.
---
### 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.
---
### 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).
---
### Summary:
| Step | Explanation | | -------------------------- | ------------------------------------- | | Principal Amount | USD 1000 (actual amount received) | | Interest Calculation Basis | On USD 1000 | | Refund Amount | Principal + Interest converted to INR |
---
If you want, I can help draft a sample calculation template or letter for refund including interest. Would that be useful?
CAclubindia
