Rule 26 of the Income-tax Rules, 1962 which states that “For the purpose of deduction of tax at source on any income payable in foreign currency, the rate of exchange for the calculation of the value in rupees of such income payable to an assessee outside India shall 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.
Explanation: For the purposes of this rule, 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 telegraphic transfer.]”
The telegraphic transfer buying rate, as mentioned above, are easily available on the RBI website and that if for any reason one has to refer to a prior period rate, old rates are also available from RBI Archives on their website, whereas it is very difficult to get past SBI buying rates.
The explanation to Rule 26 may be substituted by making a reference to the trading rate for that day as declared and available on the website of Reserve Bank of India.
The change is revenue neutral but can ease practical difficulties.