initiative such as "Make in India" to boost Indian economy create more job opportunities, it is expected to have provisions of direct taxes. Therefore it is expected that Section 43A would be amended to allow Capitalization of such foreign exchange loss even for domestically acquired asset. Also note that a standard lot size is 100,000 and one pip. However, it seems that not allowing exchange loss on liability incurred for purchase capital asset in India is not the intent. Assume that you have a 1,000 EUR/USD position. Does it really matter if it went into fixed assets or inventory first - I say no, but I welcome support or counter arguments. Also, Government at Centre has already clarified its stand to rationalize provisions of Income tax Act. Kinjesh Thakkar is Deputy Manager with Deloitte Haskins Sells LLP. If they sell off a used lathe, then I have always considered that as a sale of fixed assets, and the difference between sale proceeds and the FA NBV is a gain/loss on sale of asset - usually some kind of "other income". Loss of foreign exchange will capitalized in particular assets.
Thank you sir, would it make any difference if loss is spread in 3 years. In a short position, a price up will be a loss. There have been many controversies in the field of direct taxes revolving around loss on exchange fluctuation for liability incurred to knowledge to action - ultimate forex purchase assets in India and outside India. Of lots, then P L can be easily calculated. As no deduction neither deprecation on such loss is allowed, it eventually results in dead loss for the companies entailing approx. The current EUR/USD exchange rate.2920. Kindly direct how to account. No good tracking system for that process - so the accounting?
As the positions are marked-to-market, your margin balance will also change. However, forex trading is very challenging and tricky as a number of factors affect the exchange rates. Now the Indian bank has asked us for the excess payment which he has paid to foreign party. While trading in currencies, it is important for traders to be fully aware of their positions, and whether they are making profits or losses. P/T CFO, Business Consultant at Pacific Bag, Inc./Other Clients aug 20, 2013.