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Rule 115 Made Simple: How Income from Abroad is Converted to Indian Rupees for Tax in India

Rule 115 Made Simple: How Income from Abroad is Converted to Indian Rupees for Tax in India

If you live in India and earn income from abroad, it’s important to know how that income is converted into Indian Rupees (INR) for tax purposes. This conversion follows specific rules laid out in Indian tax law — it’s not based on random rates or dates. Even a small change in the exchange rate can affect how much tax you need to pay.

This article explains Rule 115 of the Income Tax Rules, 1962, which sets the guidelines for converting foreign income into INR. With clear examples, it helps resident taxpayers understand how to apply this rule correctly while filing their taxes.

Rule 115 Made Simple: How Income from Abroad is Converted to Indian Rupees for Tax in India

Legal Rules for Converting Foreign Income to INR (Rule 115 Made Simple)

The Income Tax Act, 1961 provides the general rules for taxing income in India. However, the method for converting income earned in foreign currency into Indian Rupees (INR) is explained under Rule 115 of the Income Tax Rules, 1962.

According to Rule 115, the foreign income must be converted using the Telegraphic Transfer Buying Rate (TTBR) of the State Bank of India (SBI). This rate is officially published and easily available, ensuring a fair and consistent way to calculate tax on foreign income.

Rule 115 Made Simple: How Income from Abroad is Converted to Indian Rupees for Tax in India

How to Choose the Right Exchange Rate Date – “Specified Date” (Rule 115 Made Simple)

Rule 115 not only tells us which exchange rate to use but also when to use it. The date for picking the rate—called the “specified date”—varies based on the type of income:

1. For Salary, Business Income, or Other Income

You must use the SBI Telegraphic Transfer Buying Rate (TTBR) from the last day of the month before the month in which the income is received or becomes due, whichever happens first.

Example:
If you receive a salary or dividend of USD 1,000 on July 10, 2025, you’ll use the TTBR from June 30, 2025.

2. For Capital Gains on Foreign Assets

Use the SBI TTBR from the last day of the month before the month in which the asset is sold.

Tax on Profits from Selling Foreign Shares

When you sell shares or assets bought in a foreign country, how long you’ve held them matters for tax:

  • Long-Term Capital Gains (LTCG): If you held the shares for more than 24 months, the profit is taxed at 12.5%, plus any extra surcharge and cess.

  • Short-Term Capital Gains (STCG): If held for 24 months or less, the profit is added to your income and taxed as per your tax slab.

Let’s understand with an example:

  • You: A resident individual in India

  • You bought shares in the US on: 15th April 2020

  • Amount invested: USD 1,500

  • Exchange rate on purchase date: 1 USD = ₹80

  • Investment value in INR: ₹1,20,000

Later, you sold the shares on 25th May 2025 for USD 2,500.

  • Exchange rate on 30th April 2025 (TTBR): 1 USD = ₹100

  • Sale amount in INR: ₹2,50,000

  • Profit (Capital Gain): ₹2,50,000 – ₹1,20,000 = ₹1,30,000

  • Holding Period: Over 24 months → LTCG

  • Tax Payable: 12.5% of ₹1,30,000 = ₹16,250 (plus surcharge and cess)

Rule 115 Made Simple: How Income from Abroad is Converted to Indian Rupees for Tax in India

This is how profits from foreign shares are taxed based on how long you hold them.

Important Tax Rules for Indian Residents Earning Foreign Income

1. Your Residency Status Matters

Rule 115 applies mainly to people who are Resident and Ordinarily Resident (ROR) in India. These individuals must pay tax on income earned both in India and abroad.

On the other hand, Non-Residents (NRIs) and Resident but Not Ordinarily Residents (RNORs) are only taxed on income that is earned or received in India. So, this rule doesn’t apply to them in the same way.

2. Keep Proper Records

Make sure to save the following details:

  • When you received or earned the foreign income

  • The value of the income in its original currency

  • Where the money came from and which country

  • SBI’s exchange rate (TTBR) on the date of receipt or accrual

  • Supporting documents like contract notes, bank statements, or invoices

These records are especially important during tax checks or when you want to claim credit for tax paid in another country.

3. Avoiding Double Tax

If you’ve already paid tax on the same income in another country, you may be able to reduce your Indian tax using Foreign Tax Credit (FTC).

To do this:

  • Check the tax agreement between India and that country (like India-USA, India-Singapore, etc.)

  • File Form 67 online before the ITR deadline

  • Keep proof of tax paid abroad and get a Tax Residency Certificate (TRC) from the foreign country

Example: If you sold US stocks and tax was deducted in the US, and the same gain is taxed in India, you can claim a tax credit in India for the US tax already paid.

Rule 115 Made Simple: How Income from Abroad is Converted to Indian Rupees for Tax in India

Conclusion

Rule 115 helps Indian taxpayers understand how to convert foreign income into Indian Rupees (INR) for tax purposes. But it’s important to follow the rule carefully—especially when choosing the right date, using the correct exchange rate, and keeping proper records.

If you’re an Indian resident earning money from abroad—like salary, dividends, business profits, or investments—you should know how this rule works to:

  • Calculate your taxes correctly

  • Avoid mistakes and penalties

  • Make full use of tax relief under DTAA and foreign tax credit (FTC)

When dealing with income from different countries or currencies, it’s wise to get help from a tax expert to avoid any confusion.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.

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FAQs

 Rule 115 outlines the method for converting foreign income into Indian Rupees for tax purposes. It helps determine the taxable value of income earned in foreign currency. (Rule 115 Made Simple)

 Rule 115 applies when an individual—especially NRIs or residents earning foreign income—needs to report or pay tax on income earned outside India that is taxable under the Indian Income Tax Act. (Rule 115 made simple)

 The rule uses telegraphic transfer buying rate (TTBR) of the last working day of the previous month, as published by State Bank of India (SBI), to convert foreign currency to INR.

 If taxable in India, your foreign salary is converted to INR using the TTBR of SBI as of the last day of the month preceding the month in which salary is due or received. (Rule 115 made simple)

 Yes. For capital gains from foreign assets taxable in India, the sale consideration, purchase cost, and improvement cost must all be converted into INR as per Rule 115 at relevant dates.

 Yes. If you’re claiming foreign tax credit (FTC) under DTAA, the taxes paid abroad must also be converted to INR using the TTBR of SBI on the date of payment.

 You can check SBI’s official website or financial publications that report daily forex rates, specifically the buying rate for telegraphic transfers. (Rule 115 made simple)

 Usually not. When filing ITR online, the system may help auto-populate some values, but it’s the taxpayer’s responsibility to ensure accurate conversion using Rule 115.

 Using incorrect rates could lead to mismatch in tax calculations, underreporting of income, or a notice from the IT Department. Always follow Rule 115 for conversions. (Rule 115 made simple)

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