Telegraphic Transfer buying rate
Also written TT buying rate · SBI TT buying rate
The State Bank of India's telegraphic transfer buying rate for a foreign currency — the rate the Income Tax rules use to convert foreign-currency capital gains and income from securities into rupees.
In plain language
Indian tax is computed in rupees. When income or a capital gain arises in dollars, dirhams or pounds, it has to be converted — and the obvious question is at which rate, and on which date?
A bank quotes different rates for buying and selling a currency. The rate the tax rules pick for converting income into rupees is the telegraphic transfer (TT) buying rate — as adopted by the State Bank of India (SBI).
The X-B workbook uses it in three situations, and each has its own date. Get the date wrong and the rupee figure is wrong, however carefully the gain was computed.
How it works
1. Non-resident selling shares or debentures of an Indian company bought in foreign currency (Rule 115A). The gain is first computed in foreign currency, then converted back.
| Item | Rate | Date |
|---|---|---|
| Sale consideration | Average rate (aggregate of SBI TT buying and selling rates) | Date of transfer |
| Cost of acquisition | Average rate | Date of acquisition — no indexation |
| Expenditure on transfer | Average rate | Date of transfer |
| Resulting capital gain | TT buying rate | Date of transfer |
This applies to non-residents (except FIIs), to every re-investment of the sale proceeds in shares or debentures of an Indian company, and is not available for unlisted securities or shares of a closely held company transferred by a non-resident (except those governed by Chapter XII-A).
2. Any other capital gain in foreign currency, for a resident or non-resident. Converted at the TT buying rate as it existed on the last day of the month immediately preceding the month in which the capital asset is transferred.
3. Income from securities earned in foreign currency (Chapter 9). Converted at the SBI TT buying rate on the last day of the month immediately preceding the month in which the income is due. Where the income is subject to TDS, the conversion date is the date on which tax is required to be deducted.
The formula
Average rate = (SBI TT buying rate + SBI TT selling rate) ÷ 2
Gain in foreign currency = Sale ÷ Avg rate(transfer) − Cost ÷ Avg rate(acquisition) − Expenses ÷ Avg rate(transfer)
Gain in rupees (Rule 115A) = Gain in foreign currency × TT buying rate on date of transfer
A worked example
All exchange rates are illustrative.
Case 1 — Rule 115A. Rajan, a non-resident, bought listed shares of an Indian company with dollars for Rs 8,00,000. On that date SBI's TT buying rate was Rs 79.50 and selling rate Rs 80.50, so the average rate was Rs 80.00. He sells for Rs 12,60,000, paying Rs 8,400 in transfer expenses. On the date of transfer: TT buying Rs 83.50, selling Rs 84.50, average Rs 84.00.
| Item | Rupees | Rate | USD |
|---|---|---|---|
| Sale consideration | 12,60,000 | 84.00 | 15,000 |
| Less: cost of acquisition | 8,00,000 | 80.00 | (10,000) |
| Less: transfer expenses | 8,400 | 84.00 | (100) |
| Gain in USD | 4,900 |
Gain in rupees = USD 4,900 × Rs 83.50 (TT buying rate, date of transfer) = Rs 4,09,150
A plain rupee computation would have given 12,60,000 − 8,00,000 − 8,400 = Rs 4,51,600. The Rs 42,450 difference is the part of the rupee gain that only reflects the rupee weakening from 80 to 84.
Case 2 — other capital gain. The workbook's case: a resident transfers a plot in Dubai on 15 May 2022. The gain is converted at the rate as it existed on 30 April 2022. If the gain is AED 1,00,000 and the TT buying rate on 30 April was Rs 20.80, the gain is Rs 20,80,000 — whatever the rate was on 15 May.
Case 3 — interest in foreign currency due on 20 March: convert at the SBI TT buying rate of 28/29 February. If TDS applies, use the rate on the date tax is required to be deducted.
Why NISM asks about it
Chapter 8 (Capital Gains), section 8.5.1 "Conversion of capital gain earned in foreign currency into Indian rupees", sets out the Rule 115A four-step conversion and the last-day-of-preceding-month rule with the Dubai plot example. Chapter 9 (Income from Other Sources), under interest on securities, applies the SBI TT buying rate to income from securities with the TDS override. Expect "which rate and which date?" questions — the average rate for sale, cost and expenses, and the TT buying rate for the final gain.
Common exam traps
- Average rate for the inputs, TT buying rate for the output under Rule 115A. Only the final foreign-currency gain is converted at the buying rate.
- Date of transfer for the Rule 115A gain; last day of the preceding month for other foreign-currency capital gains. They are different rules.
- Income from securities: last day of the month preceding the month income is due — or, if TDS applies, the date tax is required to be deducted.
- No indexation on the cost of acquisition under the Rule 115A computation.
- Not available for unlisted securities or closely held company shares transferred by a non-resident (Chapter XII-A cases apart), and not for FIIs.
- The workbook's wording is incomplete: it says the average rate is computed "by dividing the aggregate of TT buying and selling rate" without naming the divisor. An average of the two rates is their sum divided by two.
- The rate is SBI's, per the workbook — not the RBI reference rate or the investor's own bank.
Check yourself
1.Foreign currency income from securities taxable in India is converted at the SBI telegraphic transfer buying rate of which date?
- a)The date on which the income is due
- b)The last day of the month immediately preceding the month in which the income is due
- c)The last day of the financial year
- d)The date on which the securities were purchased
Show the answer
Answer: (b) The last day of the month immediately preceding the month in which the income is due
The conversion is at SBI telegraphic transfer buying rate that existed on the LAST DAY OF THE MONTH IMMEDIATELY PRECEDING the month in which income is DUE. There is one override: where the income is subject to TDS, the date of conversion will be the date on which tax is required to be deducted, so that the TDS credit matches the income reported.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Cost of acquisitionWhat an assessee is treated as having paid for a capital asset — usually the price actually paid, but overridden by special rules for bonus shares, ESOPs, gifts and inherited assets.
- Non-ResidentAn assessee who fails every residency test in section 6 — taxable in India only on income received, accruing or deemed to accrue in India, and on nothing that arises abroad.
- Long Term Capital GainThe gain on mutual fund units sold after the long-term holding period — 12 months for equity-oriented funds, 24 months for most others — taxed at 12.5% on equity funds above a Rs 1.25 lakh yearly exemption.
- Short Term Capital GainThe gain on mutual fund units sold within the holding period — 12 months or less for equity-oriented funds, 24 months or less for most others — taxed at 20% for equity funds and at slab rate otherwise.
- Exchange Rate RiskThe risk that an investment’s value, measured in the home currency, changes because foreign exchange rates move. A falling rupee raises returns on foreign assets; a rising rupee cuts them.
- TDS — Tax Deducted at SourceTax the bank deducts before crediting certain interest to you — absent on savings bank interest but charged on fixed and recurring deposit interest beyond a stipulated amount the workbook does not state.
- Depository Participant chargesThe fee NSDL or CDSL charges, through a Depository Participant, every time shares are debited from a demat account on a sale — plus GST, and irrespective of how many shares are sold.