Income Tax Act, 2025
Section 1: Subs. by Act 20 of 2002, s. 21, for section 43A (w.e.f. 12003).
1. Subs. by Act 20 of 2002, s. 21, for section 43A (w.e.f. 12003).
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Explanation 3.—Where the assessee has entered into a contract with an authorised dealer as defined
in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), for providing him with a
specified sum in a foreign currency on or after a stipulated future date at the rate of exchange specified in
the contract to enable him to meet the whole or any part of the liability aforesaid, the amount, if any, to be
added to, or deducted from, the actual cost of the asset or the amount of expenditure of a capital nature or,
as the case may be, the cost of acquisition of the capital asset under this section shall, in respect of so
much of the sum specified in the contract as is available for discharging the liability aforesaid, be
computed with reference to the rate of exchange specified therein.]
1[43AA. Taxation of foreign exchange fluctuation.—(1) Subject to the provisions of section 43A,
any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or
loss, as the case may be, and such gain or loss shall be computed in accordance with the income
computation and disclosure standards notified under sub-section (2) of section 145.
(2) For the purposes of sub-section (1), gain or loss arising on account of the effects of change in
foreign exchange rates shall be in respect of all foreign currency transactions, including those relating
to—
(i) monetary items and non-monetary items;
(ii) translation of financial statements of foreign operations;
(iii) forward exchange contracts;
(iv) foreign currency translation reserves.]
2[43B. Certain deductions to be only on actual payment.—Notwithstanding anything contained in
any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
3[(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called,
under any law for the time being in force, or]
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund
or superannuation fund or gratuity fund or any other fund for the welfare of employees, 4[or]
4[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 5[or]
5[(d) any sum payable by the assessee as interest on any loan or borrowing from any public
financial institution 6[or a State financial corporation or a State industrial investment corporation], in
accordance with the terms and conditions of the agreement 7[governing such loan or borrowing; or]
8[(e) any sum payable by the assessee as interest on any 9[loan or advances] from a scheduled
bank 10[or a co-operative bank other than a primary agricultural credit society or a primary
co-operative agricultural and rural development bank] in accordance with the terms and conditions of
the agreement governing 11[such loan or advances], 12[or]
12[(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his
13[employee, or]]
14[(g) any sum payable by the assessee to the Indian Railways for the use of railway assets,]
Subject to the provisions of section 43A,
any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or
loss, as the case may be, and such gain or loss shall be computed in accordance with the income
computation and disclosure standards notified under sub-section
of section 145.
For the purposes of sub-section
monetary items and non-monetary items;
translation of financial statements of foreign operations;
forward exchange contracts;
foreign currency translation reserves.]
2[43B. Certain deductions to be only on actual payment.—Notwithstanding anything contained in
any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
3[
any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called,
under any law for the time being in force, or]
any sum payable by the assessee as an employer by way of contribution to any provident fund
or superannuation fund or gratuity fund or any other fund for the welfare of employees, 4[or]
4[
any sum referred to in clause
of sub-section
of section 36,] 5[or]
5[
any sum payable by the assessee as interest on any loan or borrowing from any public
financial institution 6[or a State financial corporation or a State industrial investment corporation], in
accordance with the terms and conditions of the agreement 7[governing such loan or borrowing; or]
8[
any sum payable by the assessee as interest on any 9[loan or advances] from a scheduled
bank 10[or a co-operative bank other than a primary agricultural credit society or a primary
co-operative agricultural and rural development bank] in accordance with the terms and conditions of
the agreement governing 11[such loan or advances], 12[or]
12[
any sum payable by the assessee as an employer in lieu of any leave at the credit of his
13[employee, or]]
14[
any sum payable by the assessee to the Indian Railways for the use of railway assets,]