Where any income is payable in foreign currency, the deductors has to first convert the foreign currency in equivalent Indian Rupees, as per Rule 26 of Income Tax, based on TT Buying Rate of such currency as on the date on which tax is deductible.
TT Buying rate in relation to a foreign currency means the rate of exchange adopted by SBI for buying such currency in the case of telegraphic transfers, having regard to RBI guidelines.
It is advisable to keep a certificate to that effect on record to avoid any problem at the time of assessment, particularly in the case of high value transactions.
Example 1: Salary Paid in Foreign Currency:
For the purposes of deduction of tax on “salary payable in foreign currency”, the value in rupees of such salary shall be calculated at the “Telegraphic transfer buying rate” of such currency, as adopted by SBI on the date on which tax is required to be deducted at source as per Rule 26 of Income Tax.