Reporting Gross Foreign Income or INR Converted Income (After Steep Conversion) for Taxation

Tax queries 448 views 2 replies

anonthink

Individual

56 Points Joined June 2023

I receive income from foreign clients through PayPal. The issue is that PayPal has its own set of charges and higher conversion rates.

If I receive $1000 from the foreign client, and Telegraphic rates is 83, than Paypal might give me rate of 80.

Now, for the purpose of taxation, what should I report for taxation?

Should I report Foreign Income in USD multiplied by the Telegraphic rate on that date?
OR should I report the exact INR that I received in my bank account?

The problem is that Paypal does not give any receipt for steep conversion rates, and it is a loss for me if I go with Option 1 of the telegraphic rate as there is no receipt to write it off as a business expense.

One more problem is that foreign client deducts 1% TDS and it is reported in my AIS. And they apply conversion rate that is more higher than TT rates :(

What can be done in this case?

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9610 Points Joined December 2011

For taxation purposes, you should report the gross foreign income in the original currency, and then convert it to INR (Indian Rupees) using the RBI's (Reserve Bank of India) prescribed exchange rate. Here's the correct approach: 1. _Report gross foreign income_: Report the gross foreign income earned in the original currency (e.g., USD, EUR, etc.) in your tax return. 2. _Convert to INR_: Convert the gross foreign income to INR using the RBI's prescribed exchange rate for the relevant financial year. 3. _Use RBI's exchange rate_: Use the RBI's reference rate or the Telegraphic Transfer (TT) buying rate for the conversion. 4. _No double conversion_: Avoid converting the income to INR at the time of receipt and then again at the time of filing the tax return. 5. _Disclose conversion details_: Disclose the conversion details, including the original currency, exchange rate used, and the converted INR amount, in your tax return. Remember to maintain documentation, such as foreign income statements, invoices, and RBI's exchange rate certificates, to support your tax return. Consult a tax professional or chartered accountant to ensure accurate reporting and compliance with Indian tax regulations.

Sophie

20 Points Joined February 2026

Accurately reporting your gross foreign income is as essential for international tax compliance as registering your vehicle on the LTO Portal is for ensuring your legal driving status is properly verified.