How are forex gains and losses on export receipts taxed in India?

Every exporter who invoices in a foreign currency meets this question at some point. A consultant invoices a US client in dollars, and the client pays weeks later at a different rate. The rupees credited are higher or lower than the rupees booked. That difference is a foreign exchange (forex) gain or loss, which AS 11 calls an exchange difference.²

This guide explains how that difference is treated for income tax from tax year 2026-27 (1 April 2026 onwards), when the Income-tax Act, 2025 applies, and how it links to your books and GST.¹ The computation depends on your accounting method, entity type and whether you use presumptive taxation, so confirm figures with a chartered accountant (CA).

What is a forex gain or loss on an export receipt?

A forex gain or loss on an export receipt is the difference between the rupee value of a foreign currency invoice on the date you recorded it and the rupee value when it is settled or restated. AS 11 calls this an exchange difference and recognises it as income or expense in the period in which it arises.²

• Realised: the client pays and the bank credits rupees.²
• Unrealised: an invoice is still unpaid at the balance sheet date and is restated at the closing rate.²
• Not included: bank charges and platform fees are not exchange differences; record them separately.

Who does the forex gain or loss rule apply to?

The forex gain or loss rule in section 43 applies to anyone with foreign currency transactions, including monetary and non-monetary items, translation of financial statements of foreign operations, forward exchange contracts and foreign currency translation reserves.¹

How do you account for a forex gain or loss on an export receipt?

You account for a forex gain or loss by booking the invoice at its rupee value, recording the rupees credited, and recognising the difference in that period.²

1. Book the invoice: at the rupee value on the date you record it.²
2. Record the bank credit: the rupees actually credited, with bank charges or platform fees recorded separately.
3. Recognise the difference: as an exchange gain or loss in that period.²
4. Restate open invoices at the year end: keep a schedule of every foreign invoice unpaid at the year end, with the booked rate, the closing rate and the resulting difference.²
5. Agree the tax computation: your CA starts from the exchange differences in your books and adjusts for any difference between the accounting standard and the notified standard.¹

For the journal entries, see how to account for foreign currency invoices.

What rules and rates apply to forex gains and losses on exports?

The rules that apply to forex gains and losses on exports are section 43 for income tax, AS 11 for the books, rule 206 for income conversion, and rule 34(2) for GST value.¹²³⁴

Most exporters who are paid within the year therefore work from the rupees actually credited, and the forex difference appears as a gain or loss in the books.³ Exports of services under a Letter of Undertaking carry no GST, but the rupee value at the rule 34 rate is what you report; the later gain or loss is an accounting and income-tax item, not a revision of the supply value.⁴ See which exchange rate applies for income tax.

What happens if a foreign client never pays the invoice?

If a foreign client never pays, the issue is no longer a forex difference but an unrealised export. Under the FEMA (Export and Import of Goods and Services) Regulations, 2026, the realisation period for services is nine months from the invoice date, or twelve months if invoiced or settled in rupees.⁵

• Talk to your bank: before the deadline; see the export realisation period.
• Write-off: writing off the receivable has its own tax and FEMA steps, which are outside this page.

How is a forex gain or loss on an export receipt calculated?

A forex gain or loss on an export receipt is calculated as the rupees received (or the closing-rate value at the year end) minus the rupee value booked on the invoice date.² Section 43 then treats a realised gain on a client payment as taxable business income, and a realised loss reduces it.¹

The rates in these examples are illustrative. For example, if the writer had received ₹94,000 instead, the difference would be a loss of ₹1,000, and section 43 would treat it as a loss.¹²

The answer on unrealised year-end amounts depends on the year-end computation, but the books will show it: section 43 expressly covers monetary items and computes the amount under the notified standards.¹ Ask your CA how the year-end restatement flows into your return for the tax year.

What are the common mistakes with forex gains and losses on exports?

The common mistakes with forex gains and losses on exports are mixing bank charges into the exchange difference, ignoring open invoices at the year end, and revising the GST value after a rate move.²⁴

• Mixing in fees: bank charges and platform fees are not exchange differences.²
• No year-end schedule: keep the booked rate, closing rate and difference for every open invoice.²
• Revising GST value: the rule 34(2) value is fixed at the time of supply.⁴
• Letting invoices age: shorter terms or an advance reduce the gap between invoice and payment.

Exporters reduce forex swings mainly by shortening the gap between invoice and payment, or by fixing the rate in advance: invoice and collect promptly, price contracts with a margin for rate movement, or bill some clients in rupees where the client and your bank accept it.⁵ Larger exporters can consider forward contracts with an authorised dealer bank; see currency risk management for exporters.