Rule 206: Exchange rate for converting foreign-currency income into rupees
Rule 206 sets the exchange rate for working out the rupee value of income that accrues, arises or is received in foreign currency. The rate is the telegraphic transfer buying rate (as defined in Rule 207) of that currency on the "specified date". The specified date depends on the type of income and is listed in a Table, with a separate rule for income from which tax was deducted under Rule 207.
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Bare law
Rule 206 - Rate of exchange for conversion into rupees of income expressed in foreign currency
(1) The rate of exchange for the calculation of the value in rupees of any income, accruing or arising or deemed to accrue or arise to the assessee in foreign currency, or received or deemed to be received by him or on his behalf in foreign currency, shall be the telegraphic transfer buying rate of such currency as on the specified date.
(2) For the purposes of this rule- (a)"telegraphic transfer buying rate" shall have the meaning assigned to it in rule 207; and (b) (i) the "specified date" in respect of the nature of income referred in column B of the following Table shall be as given in column C:
Table Sl. No. Types of Income Specified Date A B C 1. Income chargeable under the head "Salaries". Last day of the month, immediately preceding the month in which salary is due, or is paid in advance, or arrears. 2. Income by way of interest on securities. Last day of the month, immediately preceding the month in which the income is due. 3. Income chargeable under the heads "Income from house property", "Profits and gains of business or profession" (not being income referred to in Sl.No. 4), and "Income from other sources" (excluding dividends and interest on securities). Last day of the tax year of the assessee. 4. Income chargeable under the head "Profits and gains of business or profession" in the case of a non-resident engaged in the business of operation of ships. Last day of the month, immediately preceding the month in which the income is deemed to arise in India. 5. Income by way of dividends. Last day of the month, immediately preceding the month in which dividend is declared, distributed, or paid by the company. 6. Income chargeable under the head "Capital gains". Last day of the month, immediately preceding the month of in which the capital asset in the table is transferred; (ii) the specified date, in respect of income referred to in sub-clause (ii), payable in foreign currency and from which tax has been deducted at source under rule 207, shall be the date on which the tax was required to be deducted under the provisions of the Chapter XIX-B.
(3) Nothing contained in sub-rule (1) shall apply in respect of income referred to in sub-rule (2)(b) [Table:Sl.No. 3], where such income is received in, or brought into India by the assessee or on his behalf before the specified date, in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973).
Rule breakdown
The rate — Rule 206(1)
The rupee value of income accruing, arising, deemed to accrue or arise, received or deemed to be received in foreign currency is calculated at the telegraphic transfer buying rate of that currency on the specified date.
Rule 206(2)(a) borrows the meaning of "telegraphic transfer buying rate" from Rule 207: the rate adopted by the State Bank of India for buying that currency when it is made available to the bank through a telegraphic transfer, having regard to Reserve Bank of India guidelines.
The specified date — Rule 206(2)(b)
Salary: the last day of the month immediately preceding the month in which the salary is due, or is paid in advance, or in arrears.
Interest on securities: the last day of the month immediately preceding the month in which the income is due. Dividends: the last day of the month immediately preceding the month in which the dividend is declared, distributed or paid.
House property, business or profession (other than row 4) and other sources (excluding dividends and interest on securities): the last day of the tax year. Shipping business of a non-resident: the last day of the month immediately preceding the month in which the income is deemed to arise in India. Capital gains: the last day of the month immediately preceding the month in which the capital asset is transferred.
Under Rule 206(2)(b)(ii), for foreign-currency income from which tax was deducted at source under Rule 207, the specified date is the date on which tax was required to be deducted under Chapter XIX-B.
Exception — Rule 206(3)
Sub-rule (1) does not apply to income in row 3 of the Table where that income is received in or brought into India by or on behalf of the assessee before the specified date, in accordance with the Foreign Exchange Regulation Act, 1973, which is the statute the printed text names.
Printing points to note
The text of row 6 and of Rule 206(2)(b)(ii) is reproduced exactly as notified, including the words "month of in which", "capital asset in the table" and "income referred to in sub-clause (ii)". Read these provisions with professional advice where the wording affects the result.
Key takeaways
TT buying rate
Conversion uses the telegraphic transfer buying rate defined in Rule 207.
Date depends on income type
The Table fixes a different specified date for each type of income.
TDS cases
Where tax was deducted under Rule 207, the specified date is the date tax was required to be deducted.
Practical checklist
- Classify the income by head before choosing the specified date.
- Use the telegraphic transfer buying rate as defined in Rule 207.
- Keep a record of the rate and date used for each conversion.
Avoid
- Do not use a single annual average rate where the Table fixes a monthly date.
- Do not apply the row 3 date to dividends or interest on securities; rows 2 and 5 cover them.
FAQs
Which exchange rate is used to convert foreign-currency income?
The telegraphic transfer buying rate of that currency on the specified date, under Rule 206(1).
What is the specified date for salary?
The last day of the month immediately preceding the month in which the salary is due, or is paid in advance, or in arrears.
What is the specified date for business income?
Generally the last day of the tax year (row 3). For a non-resident in the business of operation of ships, the last day of the month before the month in which the income is deemed to arise in India (row 4).
What if tax was deducted at source on the foreign-currency income?
Under Rule 206(2)(b)(ii), the specified date is the date on which the tax was required to be deducted under Chapter XIX-B.
Glossary
- Telegraphic transfer buying rate
- The State Bank of India rate for buying a foreign currency made available through a telegraphic transfer, as defined in Rule 207(3)(b).
- Specified date
- The date fixed by the Rule 206 Table, or by Rule 206(2)(b)(ii), on which the exchange rate is taken.