Section 43 — Taxation of foreign exchange fluctuation

Old Act equivalent: Section 43AA of IT Act 1961 Sub-part: D.—Profits and gains of business or profession

Statutory Text

(1) Subject to the provisions of section 42, any gain or loss arising on

account of change in foreign exchange rates on foreign currency transactions shall be treated as income or loss, as the case may be, and shall be computed as per the income computation and disclosure standards notified under section 276(2). (2) The provisions of sub-section (1) shall be applicable to all foreign currency transactions, including those relating to—

(a) monetary items and non-monetary items;

(b) translation of financial statements of foreign operations;

(d) foreign currency translation reserves. Amortisation of certain preliminary expenses.

(1) Subject to the provisions of section 42, any gain or loss arising on

account of change in foreign exchange rates on foreign currency transactions shall be treated as income or loss, as the case may be, and shall be computed as per the income computation and disclosure standards notified under section 276(2).

(2). (2) The provisions of sub-section (1) shall be applicable to all foreign currency transactions, including those relating to—

(a) monetary items and non-monetary items;

(b) translation of financial statements of foreign operations;

(d) foreign currency translation reserves. Amortisation of certain preliminary expenses.

None.

None.

None.

Applies to: Assessees with foreign currency monetary items.
Scope: Unrealised gains/losses from revaluation of foreign currency monetary items taxable as business income.
Key rule: Mark-to-market gains/losses on forex items treated as business income.