Taxability of earnings in foreign currency

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CA SONIYA AGARWAL

CA SONIYA AGARWAL (Querist)
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16 January 2014 what is the tax treatment of earnings in foreign currency

CA Suresh Jain

CA Suresh Jain (Expert)
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17 January 2014 It depends on the status of the recipient

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Regarding **taxability of earnings in foreign currency**, here’s a clear explanation:

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### Tax Treatment of Earnings in Foreign Currency

1. **Residential Status of Assessee**
Taxability depends on whether the recipient is a **resident** or **non-resident** in India.

2. **Income Received or Accrued**
Under the Income Tax Act, income is taxable on the basis of **accrual or receipt**, whichever is earlier.

3. **Conversion into Indian Rupees**
Income earned in foreign currency must be converted into Indian Rupees (INR) using the **telegraphic transfer (TT) buying rate** prevailing on the date of receipt or accrual (whichever is earlier).

4. **Heads of Income**
Earnings in foreign currency can arise under various heads, e.g.:

* **Salary**: Foreign salary income is taxable in India if the individual is a resident.
* **Business income**: Income from export or services provided abroad.
* **Capital gains**: Sale of foreign assets.
* **Other sources**: Interest or dividends from foreign investments.

5. **Double Taxation Relief**
If tax is paid abroad on such earnings, relief under **Double Taxation Avoidance Agreements (DTAA)** or Section 91 of the Income Tax Act may be available.

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### Summary

| Aspect | Treatment |
| --------------------- | ----------------------------------------------------------------------------- |
| Resident Assessee | Foreign income taxable in India |
| Non-Resident Assessee | Taxable only if income is received or accrues in India |
| Currency Conversion | Convert foreign earnings to INR at prevailing TT rate on accrual/receipt date |
| Tax Relief | Available under DTAA or Sec 91 for foreign taxes paid |

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