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Query relating to foreign exchange

HARISH BANSAL (student)     01 February 2014

 11 likes  229 points

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Hello Everybody,

Let say an Indian Company has granted loan to its foreign wholly owned subsidry on 1st Feb, 2012 of $10000 for 2 Years, at the time of granting the loan the rate of $ was let say 50. On 31st March, 2012 rate of $ is 55. And on 31st March, 2013 rate of $ is 58.

And at time of getting back the loan amount i.e. Rs.600000(10000*60) on 31st Jan, 2014 rate of $ is 60. Company is making his books of account as per accrual basis.

Now I want to know that on 31st March, 2012, whether the Exchange Difference i.e. Rs.50000 will be taxable in F.Y. 11-12.

OR the whole exchange difference will be taxable in F.Y. 13-14, i.e. Rs.100000 when loan amount was taken back.

OR the whole Exchange Difference is a Capital Receipt?


Harish Bansal

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