Foreign exchange gain on doubtful sundry receivables

Dear Sir,

Query:

Two Export invoices were raised to a party two years back for a  sum  of Rs.14 Crores which is doubtful of recovery.  Should be provide for foreign exchange fluctuation as on 31.3.2014?. If provided, there  will be foreign exchange gain of Rs.1.5Crores which results in income tax thereon .  The query is being raised whether to pay tax on unrealized foreign exchange gain though even the receivable itself in doubtful.

With Regards,

T.Baskaran

 

Replies (1)

If assessee follows accrual system of accounting then unrealised foreign exchange gain become taxable. But u may claim it as deduction in the year in which those debtors shown as actual bad debts in your P&L account.

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