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CMA Final · Direct Tax Laws and International Taxation · Income Computation and Disclosure Standards (ICDS)

Under section 43 of the Income-tax Act, 2025, a gain or loss arising from changes in foreign exchange rates on foreign currency transactions is computed as per which basis?

Foreign exchange gain or loss on foreign currency transactions is treated as income or loss and computed as per the income computation and disclosure standards notified under section 276(2). The rule covers monetary and non-monetary items, forward contracts, foreign operations and translation reserves.

  1. AThe income computation and disclosure standards notified under section 276(2)Correct
  2. BOnly the accounting policy of the assessee's auditor
  3. CThe exchange rates prevailing on the date of assessment
  4. DThe cash basis irrespective of any notified standard

Explanation

Section 43(1) says such gain or loss is treated as income or loss and computed as per the ICDS notified under section 276(2). It applies to monetary and non-monetary items, forward contracts and more. The other options are not the stated basis.

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