Tax Implications of accepting income in $ vs. Rs. for Pvt.Lt

Option I: Accepting the payments in foreign currencies:

If the payments are accepted in foreign currencies, foreign exchange fluctuations have to be accounted. This will result in foreign exchange gain or loss based on the appreciation or depreciation in the value of currencies. This notional gain or loss will be disallowed in Income tax act. Accounting Standard 11 has to be followed in preparation or presentation of financial statements. Further if you want to safeguard yourself from the foreign exchange fluctuations resulting in loss, then you have to enter a forward exchange contract with the bank to get the payment in an agreed exchange rate.

Option II: Accepting the payments in Indian Rupee:

All the above said principles will not be applicable in case if the payments are made in the Indian Rupee that has been originally agreed in the contract.

Dr. jones, 

It is advisable to realise the money in foreign currency and claim export benefits. 

Regards

Sahana Murthy

What kind of export benefits do we get if we realize money in foreign currency?

Thanks!

HI DR. JONES

PROVIDE US DETAILS OF YOUR BUSINESS ACTIVITIES LIKE TURNOVER IN HARD CURRENCY AREAS($) AND TURNOVER IN LOCAL MARKET..... PLUS ANY TAX DEDUCTED BY FOREIGN CLIENTS.... NATURE OF YOUR BUSINESS AND PRODUCT IN WHICH YOU DEAL.... THE INFORMATION WILL ENABLE YOU TO FETCH EXTRA BENFITS....

REGARDS

Hi Virender Kumar,

Thanks for your reply.

We have a division which deals with software development.

As its a beginning, our current revenue is around $1000. This will increase in coming months.

Foreign clients do not deduct any TDS.

Let us know what benefits we can avail.

Thanks!

YOU CAN APPLY FOR THE REFUND OF SERVICE TAX IF ANY PAID BY YOU ON BROADBAND SERVICES/RENT ETC.

ELSE YOU CAN APPLY FOR DUTY DRAWBACK...

FOR BOTH OF THE BENEFITS THERE ARE CERTAIN PROCEDURES TO FOLLOW...

Thank You Mr. Virender Kumar.

May I know what procedures to follow? Do we have to apply for some export licensing, etc ?

FIRST OF ALL I WISH TO ALARM YOU THAT YOU MUST HAVE VALID IMPORTER EXPORTER CODE NUMBER FOR EXPORTS

SECONDLY YOU MUST GET THE AMOUNT IN FORIENGN CURRENCY TO AVOID SERVICE TAX IMPLICATIONS ETC.

FOR FURTHER DETAILS CONTACT US BY PUTTING YOUR MOBILE DETAILS OVER THERE

REGARDS

Dear Sir,

The Service tax refund process is very easy. There is govt notification to provide refund within a month provided the documents are correct. It is a separate application to be made and the refund will be given by cheque. Incase of any confusion you can contact us  in 9231897170