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?
CAclubindia
