I have received dividends from my company based in Sweden in Apr 2022. The rate of exchange I got from the remittance to my bank was 7.3 INR per SEK.
For example’s sake, let the amount be 100000 SEK.
Then I would have received 73 lacs, of which I have 33% tax liability.
(Let’s ignore TDS deducted in Sweden for simplicity, though they take 10 to 30% before remittance based on various circumstances)
However applying rule 115 of income tax, the exchange rate comes to 8.1 INR per SEK (the rate fluctuates a lot)
Below is the extract of rule 115 from income tax site
in respect of income by way of dividends, the last day of the month immediately preceding the month in which the dividend is declared, distributed or paid by the company;
Hence based on the example above, the income to be considered is higher (81 lacs) than what was actually received (73 lacs) and I will end up paying more tax than I should (around 2.64 lacs more). Is this fair?
Are there any rules that allow us to use exchange rate at the time of transfer?
I saw this link on income tax site discussing the fluctuations but didn’t fully understand who it applies to.
It has below text
An average rate for a week or a month that approximates the actual rate at the date of the transaction may be used for all transaction in each foreign currency occurring during that period. If the exchange rate fluctuates significantly, the actual rate at the date of the transaction shall be used.
Should I just pay the extra tax to avoid hassles?
Some feedback will be appreciated.
@Shrutika_Shah
@Bharti_Vasvani
@Muskan_Balar
@CA_Niyati_Mistry
And others please help