Which exchange rate do I use to report foreign income?
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Short answer
For fees received in India during the year, the usual starting point is the rupees actually credited, because rule 206(3) of the Income-tax Rules, 2026 switches off the prescribed conversion rate for business or professional income brought into India before the last day of the tax year.1 Income not received by then is converted at the State Bank of India telegraphic transfer (TT) buying rate on that last day, 31 March 2027 for tax year 2026-27.14 Foreign tax withheld uses a different date: the TT buying rate on the last day of the month before the tax was deducted.2
A web developer invoices a Canadian client in dollars every month, a translator bills a German agency in euros, and an agency in Kochi bills an Australian retailer in Australian dollars. Each must report that income in rupees. From tax year 2026-27 (income earned from 1 April 2026), the rule is rule 206 of the Income-tax Rules, 2026, which replaced rule 115 of the 1962 Rules.1
What does rule 206 say for business or professional income?
Rule 206(1) converts income in foreign currency at the telegraphic transfer (TT) buying rate on a "specified date".1 For income under "Profits and gains of business or profession", the specified date is the last day of the tax year.1
Rule 206(3) then says sub-rule (1) does not apply to that income where it is received in, or brought into, India by you or on your behalf before the specified date.1 So for a freelancer paid into an Indian bank account during the year, the rupees credited (shown on the bank advice or Foreign Inward Remittance Advice, FIRA) are the natural figure.
Which rate applies in each situation?
The table summarises the rules for tax year 2026-27.123
| Situation | Rate to use |
|---|---|
| Fee received in India during the tax year | Rupees actually credited (rule 206(1) does not apply) |
| Fee earned but not received in India by 31 March 2027 | SBI TT buying rate on 31 March 2027 |
| Foreign tax a client withheld, for Form No. 44 | SBI TT buying rate on the last day of the month before the month of deduction |
| Gap between invoice-date value and rupees received | Exchange gain or loss under section 43 |
How do I record the difference from the invoice date?
Book each invoice at the rate your accounting method uses on the invoice date, then record the rupees received. The difference is a foreign exchange gain or loss, which section 43 of the Income-tax Act, 2025 treats as income or loss.3 See forex gain or loss on export receipts and how to account for foreign currency invoices.
What should I keep on file?
Keep each invoice, the bank credit or FIRA showing the rupee amount, and a copy of any SBI TT buying rate you rely on for unpaid invoices or withheld tax.12 If you hold money in a foreign account or platform balance at the year end, ask your chartered accountant (CA) how it is valued; the full rules are in exchange rate for income tax on foreign income.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
- [1]Income-tax Rules, 2026, rule 206 (rate of exchange for conversion of income) (Income Tax Department)
- [2]Income-tax Rules, 2026, rule 76 (Foreign tax credit) (Income Tax Department)
- [3]Income-tax Act, 2025, section 43 (Income Tax Department section page)
- [4]Income-tax Rules, 2026, rule 207 (telegraphic transfer buying rate) (Income Tax Department)
Frequently asked questions
Do I convert all my dollar receipts at the 31 March rate?+
Usually not. Rule 206(3) says the specified-date rate does not apply to business or professional income received in or brought into India before the specified date.1
What is the TT buying rate?+
Rule 206 takes its meaning from rule 207: the rate or rates the State Bank of India adopts for buying a foreign currency, having regard to Reserve Bank of India guidelines.14
Can I use the rate on Google or a currency converter?+
Those are indicative market rates, not the rate the rules prescribe. Use the rupees credited for receipts during the year, and the SBI TT buying rate where rule 206(1) or rule 76 applies.12
Is the difference between invoice value and rupees received taxable?+
Yes. Section 43 of the Income-tax Act, 2025 treats gains or losses from exchange rate changes on foreign currency transactions as income or loss.3
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
Which exchange rate do you use to convert foreign income for Indian income tax?
Which rupee conversion rate applies to foreign income for Indian income tax from tax year 2026-27: rule 206 (old rule 115), the SBI TT buying rate and exceptions.
TaxHow are forex gains and losses on export receipts taxed in India?
How exchange gains and losses on foreign client payments are taxed in India under section 43 of the Income-tax Act, 2025, with year-end and GST points.
TaxHow do you account for a foreign currency invoice in India?
How Indian freelancers and agencies record USD, EUR or GBP invoices in rupees: the rate on the invoice date, year-end restatement, and exchange differences.
TaxHow do Indian service exporters claim credit for tax a foreign client withheld?
How Indian freelancers claim credit for tax withheld by foreign clients: DTAA relief, Form 67 (FY 2025-26), Form 44 (tax year 2026-27), deadlines, rejections.