Rule 206 of the Income-tax Rules, 2026

Where this rule sits

Rule 206 gives effect to Section 263 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.

← Rule 205  ·  Rule 207 →

What this rule does

Sub-rule (1) fixes the rate of exchange for calculating the rupee value of any income accruing or arising, or deemed to accrue or arise, to the assessee in foreign currency, or received or deemed to be received by him or on his behalf in foreign currency, as the telegraphic transfer buying rate of that currency as on the specified date.

Sub-rule (2) takes "telegraphic transfer buying rate" from rule 207 and fixes the specified date by a Table of six entries. For income chargeable under the head "Salaries", it is the last day of the month immediately preceding the month in which the salary is due, or is paid in advance or in arrears. For income by way of interest on securities, it is the last day of the month immediately preceding the month in which the income is due. For income chargeable under the heads "Income from house property", "Profits and gains of business or profession" other than the income at entry 4, and "Income from other sources" excluding dividends and interest on securities, it is the last day of the tax year of the assessee. For income under "Profits and gains of business or profession" in the case of a non-resident engaged in the business of operation of ships, it is the last day of the month immediately preceding the month in which the income is deemed to arise in India. For income by way of dividends, it is the last day of the month immediately preceding the month in which the dividend is declared, distributed or paid by the company. For income chargeable under the head "Capital gains", it is the last day of the month immediately preceding the month in which the capital asset is transferred. Sub-clause (ii) provides that for income payable in foreign currency from which tax has been deducted at source under rule 207, the specified date is the date on which the tax was required to be deducted under the provisions of Chapter XIX-B.

Sub-rule (3) disapplies sub-rule (1) in respect of income falling in entry 3 of the Table where such income is received in, or brought into, India by the assessee or on his behalf before the specified date, in accordance with the provisions of the Foreign Exchange Regulation Act, 1973.

Why it is there

Income earned in a foreign currency has to be brought into a rupee computation, and the answer changes with the day chosen. The rule removes the choice: one rate, the telegraphic transfer buying rate, on one date fixed separately for each kind of income. The dates track the event that makes the income taxable — the month salary falls due, the month a dividend is declared, the month a capital asset is transferred — while heads of income that accrue through the year are converted at the last day of the tax year.

Who it applies to

• An assessee with income accruing or arising, or deemed to accrue or arise, in foreign currency
• An assessee receiving or deemed to receive income in foreign currency, whether directly or on his behalf
• A non-resident engaged in the business of operation of ships
• A person from whose foreign currency income tax has been deducted at source under rule 207

The figures, and what each one turns on

What this means in practice

The specified date is almost always the last day of the month before the month of the event, not the date of the event itself, so a salary due in June is converted at the rate on the last day of May. Entry 3 is the exception that works on the tax year, and it is also the only entry sub-rule (3) touches: where that income is received in or brought into India before the specified date in accordance with the Foreign Exchange Regulation Act, 1973, sub-rule (1) does not apply to it at all. The rule does not supply a rate of its own — the telegraphic transfer buying rate is defined in rule 207 — and where tax has been deducted at source under that rule, sub-clause (ii) moves the specified date to the date on which the tax was required to be deducted under Chapter XIX-B.

An example

A resident individual is due salary of usd 10,000 for June 2026 from an overseas employer. Entry 1 of the Table fixes the specified date as 31 May 2026, so the amount is converted at the telegraphic transfer buying rate on that day, not at the rate on the day the salary is credited. If the same person sells foreign shares in September 2026, entry 6 converts the capital gain at the rate on 31 August 2026.

Where you meet this rule

In the rupee figures reported in the return for foreign salary, dividends, interest or capital gains, and in any assessment where the Assessing Officer recomputes those figures at the prescribed rate and date.

The words themselves

What people get wrong

• Converting at the rate on the date of receipt or of the transaction. The Table fixes the specified date, which for most entries is the last day of the month immediately preceding the month of the event.
• Using the last day of the tax year for every kind of income. That date applies only to entry 3, and entry 3 itself excludes the shipping income in entry 4 and excludes dividends and interest on securities.
• Using a bank's selling rate or a card rate. Sub-rule (1) requires the telegraphic transfer buying rate, which takes its meaning from rule 207.
• Applying the Table where tax has been deducted at source on foreign currency income. Sub-rule (2)(b)(ii) shifts the specified date to the date on which the tax was required to be deducted under Chapter XIX-B.
• Overlooking sub-rule (3). Income within entry 3 that is received in or brought into India before the specified date in accordance with the Foreign Exchange Regulation Act, 1973 is outside sub-rule (1).

Read with

• Rule 207