The Income Tax (Seventeenth Amendment) Rules, 2023, has amended Rule 26 of the Income Tax Rules, 1962. The amendment changes the rate of exchange that will be used for the calculation of the value in rupees of any income payable in foreign currency.

The new rate of exchange will be the telegraphic transfer buying rate of such currency as on the date on which the tax is required to be deducted at source under the provisions of Chapter XVIIB by the person responsible for paying such income.

This amendment will come into force from the date of its publication in the Official Gazette, which is August 18, 2023.

The amendment also clarifies the definition of an "International Financial Services Centre" (IFSC) and a "Unit". An IFSC is a financial hub that is located in India and that is regulated by the Reserve Bank of India. A Unit is a company or other entity that is located in an IFSC.

Here is a summary of the key changes: The rate of exchange for the calculation of the value in rupees of any income payable in foreign currency will be the telegraphic transfer buying rate of such currency as on the date on which the tax is required to be deducted at source.

This amendment will apply to income payable to: -> An assessee outside India; -> A Unit located in an International Financial Services Centre; and -> By a Unit located in an International Financial Services Centre to an assessee in India.

The amendment will come into force from August 18, 2023. Notification No. 64/2023 dated 17-Aug-2023