Section-43: Taxation of foreign exchange fluctuation

Section-43 : Taxation of foreign exchange fluctuation

Section-43 provide for capitalising the impact of foreign exchange fluctuation and taxation of foreign exchange fluctuation at the time of acquisition of assets and payments therefor in foreign currency by appropriately adding or reducing the quantum of variation in such liability. The said clauses further provide for treating profits or loss on account of fluctuation in exchange rate. Learn to understand the section-43 as it is, it's help and useful links to follow.

Here onwards, "Act" refers to "Income Tax Act 2025"

1. Section-43 as per act

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).
The provisions of sub-section (1) shall be applicable to all foreign currency transactions including—
1. monetary items and non-monetary items;
2. translation of financial statements of foreign operations;
3. forward exchange contracts; and
4. foreign currency translation reserves.