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Summary of ICDS VI - Effects of changes in Foreign Exchange Rates - issued by CBDT

Dated:- 7-4-2015 - Income Computation & Disclosure Standards (ICDS) Issued by CBDT under power under section 145(2) of Income Tax Act, 1961 vide notification no. 32/2015, dated 31-3-2015 Purpose: Computation of Income under PGBP head and Income from Other sources head Applicability: All assessee following mercantile accouting system W.e.f. 01/04/2015 i.e. Assessment year 2016-17 CDS - VI - Effects of changes in Foreign Exchange Rates S. No. Scope of ICDS Par .....

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change rate - rate of one currency in terms of another currency , Foreign currency - other than reporting currency , Foreign operations of a person - Means branch or any other establishment outside India, Foreign Currency Transactions - Denominated in foreign currency or requires settlement in foreign currency , Forward Exchange Contract - Agreement to exchange currencies at a forward rate, any foreign currency option contract or any other similar financial instrument , Forward rate - Specified .....

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quity shares , Reporting currency - Means Indian currency except in case of foreign operations. 3. Foreign Currency Transactions - Initial Recognition - Exchange rate at the date of transactions , in case of regular transactions a average rate that approximates the actual rate can be used for a number of transactions in a period but in case any significant fluctuations, actual rate at the date of transaction will be considered. All these are subject to provision of sec. 43A of t .....

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rence - Monetary items exchange differences will be recognised in profit & loss acoount in previous year and in case of non monetary items exchange differences will not be recognised in profit & loss account. All these are subject to provision of sec. 43A of the act or rule 115 of income tax rules as the case may be. 6. Financial Statements of Foreign Operations - Classification of Foreign Operations - Separte methods of conversion in case of Intergral operations and Non .....

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than Indian currency , Cash flow are insulated from the activities of day to day activities of the foreign operations , Sale price of the foreign operation's product and services are determined by local competition or local government regulations , there is active local sales market for the foreign opertion's products or services. 8. Conversion of Integral Foreign Operations - Same as foreign transactions conversion. 9. Conversion of Non integral Foreign .....

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