Draft Income Tax Rule 207, 208: Rate of Exchange for Forex TDS; Declaration & Evidence by Specified Senior Citizen u/s 393(1) Sl. No. 8(iii)
Rules 207 and 208 of the Draft Income-tax Rules, 2026 prescribe procedures relating to foreign currency tax deduction at source (TDS) and compliance for specified senior citizens. Rule 207 provides that for deduction of tax at source on income payable in foreign currency under Chapter XIX-B, the value in rupees shall be computed using the telegraphic transfer buying rate as on the date on which tax is required to be deducted. This applies to income payable to an assessee outside India, to a Unit located in an International Financial Services Centre (IFSC), and by an IFSC Unit to an assessee in India. The “telegraphic transfer buying rate” refers to the rate adopted by the State Bank of India in accordance with Reserve Bank of India guidelines, and “International Financial Services Centre” and “Unit” carry meanings assigned under the Special Economic Zones Act, 2005. Rule 208 provides that a specified senior citizen may furnish a declaration in Form No. 125 to the specified bank under the relevant provisions. The bank shall compute total income after allowing deductions under Chapter VIII and rebate under section 156, based on evidence furnished during the tax year, and deduct income-tax at applicable rates. These rules standardize forex TDS computation and simplify tax compliance for eligible senior citizens.
Extract of Rule No. 207, 208 of Draft Income-tax Rules, 2026
Rule 207
Rate of exchange for the purpose of deduction of tax at source on income payable in foreign currency.
(1) For the purpose of deduction of tax at source on any income payable in foreign currency as specified in sub-rule (2), the rate of exchange for calculation of the value in rupees shall be the telegraphic transfer buying rate of such currency as on the date on which such tax is required to be deducted under the provisions of Chapter XIX-B.
(2) The provisions of sub-rule (1) shall be applicable in respect of income payable-
(a) to an assessee outside India;
(b) to a Unit located in an International Financial Services Centre;
(c) by a Unit located in an International Financial Services Centre to an assessee in India.
(3) For the purposes of this rule,—
(a) “International Financial Services Centre” shall have the same meaning as assigned to it in section 2(q) of the Special Economic Zones Act, 2005;
(b) “telegraphic transfer buying rate”, in relation to a foreign currency, means the rate or rates of exchange adopted by the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), for buying such currency, having regard to the guidelines specified from time to time by the Reserve Bank of India for buying such currency, where such currency is made available to that bank through a tele- graphic transfer;
(c) “Unit” shall have the meaning assigned to it in section 2(zc) of the Special Economic Zones Act, 2005 (28 of 2005).
Rule 208
Furnishing of declaration and evidence of claims by specified senior citizen under section 393(1) [Table: Sl. No. 8(iii)] of the Act.
(1) The declaration under section 402(39)(c) read with Section 393 (1) [Table: Sl. No. 8(iii)] may be furnished by the specified senior citizen to the specified bank in Form No. 125.
(2) The specified bank shall, after giving effect to the deduction allowable under Chapter VIII and rebate allowable under section 156, compute the total income of such specified senior citizen for the relevant tax year and deduct income-tax on such total income on the basis of the rates in force.
(3) The effect to tha deduction allowable under Chapter VIII shall be given based on the evidence furnished by the specified senior citizen during the tax year.
