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cross currency swap & income tax implication

Tax queries 1338 views 1 replies

XYZ is an Indian Company. It takes a loan in EURO from one of its group company in Germany. It enters into a cross currency swap for the loan with an Indian bank to eliminate its foreign exchange exposure.

We understand that in some countries, gains and losses on cross currency swap are taxed as they arise. But gains or losses on foreign denominated loan are taxed only when the loan are repaid (i.e. when the gain or loss is realised). 

Can any one comment what is the tax position in India for this hedging arrangement?

Replies (1)

upto what i am able to understand your querry , is that what shall be the treatment of  permium paid for hedging against the currency fluctuation ,

If matching concept is followed thepremium paid has to  be divided  by the tenure of the loan  and expenses can be claimed

 

if conservative approach is followed  then whatever the premium paid be debited toprofit &loss a/c


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