Taxation of foreign exchange fluctuation
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 43(1) of Income Tax Act 2025
(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, and shall be computed as per the income computation and disclosure standards notified under section 276(2).
Section 43(2) of Income Tax Act 2025
(2) The provisions of sub-section (1) shall be applicable to all foreign currency transactions including—
(a) monetary items and non-monetary items;
(b) translation of financial statements of foreign operations;
(c) forward exchange contracts; and
(d) foreign currency translation reserves.
