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Effects of Changes in Foreign Exchange Rates - only for AY 2016-17

ICDS - 06 (old) - Rule - Old - ICDS for AY 2016-17 (Since withdrawn) - Other Direct Tax / Income Tax - ICDS - 06 (old) - ICDS VI - Effects of Changes in Foreign Exchange Rates [See: Notification No. 32/2015 Dated:- 31-3-2015] [ Came into force with effect from 1st day of April, 2015, - Only for AY 2016-17] Since Withdrawn vide notification no. 86/2016 dated 29-9-2016 F. INCOME COMPUTATION AND DISCLOSURE STANDARD VI RELATING TO THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES Preamble This Income .....

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d Disclosure Standard deals with: (a) treatment of transactions in foreign currencies; (b) translating the financial statements of foreign operations; (c) treatment of foreign currency transactions in the nature of forward exchange contracts. Definitions 2. (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified: (a) "Average rate" is the mean of the exchange rates in force during a period. (b) "Closing rate" is the exch .....

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at person, the activities of which are based or conducted in a country other than India. (g) "Foreign currency transaction" is a transaction which is denominated in or requires settlement in a foreign currency, including transactions arising when a person: - (i) buys or sells goods or services whose price is denominated in a foreign currency; or (ii) borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency; or (iii) becomes a party to an unper .....

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an currency" shall have the meaning as assigned to it in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999); (k) "Integral foreign operation" is a foreign operation, the activities of which are an integral part of the operation of the person; (l) "Monetary items" are money held and assets to be received or liabilities to be paid in fixed or determinable amounts of money. Cash, receivables, and payables are examples of monetary items; (m)"Non-integra .....

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Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act. Foreign Currency Transactions Initial Recognition 3(1) A foreign currency transaction shall be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (2) An average rate for a week or a month that approximates the actual rate a .....

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reporting currency that is likely to be realised from or required to disburse, a foreign currency monetary item owing to restriction on remittances or the closing rate being unrealistic and it is not possible to effect an exchange of currencies at that rate, then the relevant monetary item shall be reported in the reporting currency at the amount which is likely to be realised from or required to disburse such item at the last date of the previous year; and (c) non-monetary items in a foreign cu .....

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e recognised as income or as expense in that previous year. Exceptions to Paragraphs 3, 4 and 5 6. Notwithstanding anything contained in paragraph 3, 4 and 5; initial recognition, conversion and recognition of exchange difference shall be subject to provisions of section 43A of the Act or Rule 115 of Income-tax Rules, 1962, as the case may be. Financial Statements of Foreign Operations Classification of Foreign Operations 7. (1) The method used to translate the financial statements of a foreign .....

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significant degree of autonomy from the activities of the person; (b) transactions with the person are not a high proportion of the foreign operation's activities; (c) the activities of the foreign operation are financed mainly from its own operations or local borrowings; (d) costs of labour, material and other components of the foreign operation's products or services are primarily paid or settled in the local currency; (e) the foreign operation's sales are mainly in currencies othe .....

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xports. Integral Foreign Operations 8. The financial statements of an integral foreign operation shall be translated using the principles and procedures in paragraphs 3 to 6 as if the transactions of the foreign operation had been those of the person himself. Non-integral Foreign Operations 9. (1) In translating the financial statements of a non-integral foreign operation for a previous year, the person shall apply the following, namely: - (h.1.a) the assets and liabilities, both monetary and no .....

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ct or Rule 115 of Income-tax Rules, 1962 shall be carried out in accordance with the provisions contained in that section or that Rule, as the case may be. Change in the Classification of a Foreign Operation 10 (1) When there is a change in the classification of a foreign operation, the translation procedures applicable to the revised classification should be applied from the date of the change in the classification. (2) The consistency principle requires that foreign operation once classified a .....

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s expense in the previous year in which the exchange rates change. Any profit or loss arising on cancellation or renewal shall be recognised as income or as expense for the previous year. (2) The provisions of sub-para (1) shall apply provided that the contract: (a) is not intended for trading or speculation purposes; and (b) is entered into to establish the amount of the reporting currency required or available at the settlement date of the transaction. (3) The provisions of sub-para (1) shall .....

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ract is the difference between: (a) the foreign currency amount of the contract translated at the exchange rate at the last day of the previous year, or the settlement date where the transaction is settled during the previous year; and (b) the same foreign currency amount translated at the date of inception of the contract or the last day of the immediately preceding previous year, whichever is later. (5) Premium, discount or exchange difference on contracts that are intended for trading or spec .....

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