Which exchange rate converts your US dividends and RSU sale gains? Rule 206 of the Income-tax Rules 2026 and the SBI TT buying rate

If you are a resident employee holding US shares through an RSU or ESPP plan, two numbers decide how much of your dividend and sale proceeds you report in rupees: the US dollar amount and the exchange rate. From 1 April 2026, the second number is governed by rules 206 and 207 of the Income-tax Rules, 2026, notified as G.S.R. 198(E) on 20 March 2026. They replace the conversion provision in rule 115 of the 1962 Rules, and they leave very little room for choice: one bank, one type of rate and one fixed date for each kind of income.

Below: what rules 206 and 207 say, a worked example on a Rs 30 lakh salary, and the mistakes that create a mismatch with your AIS.

What the Section Says

Rule 206(1): the conversion rate

Rule 206(1) says that income accruing or received in foreign currency is converted into rupees at the telegraphic transfer (TT) buying rate of that currency on the "specified date". Rule 207(3)(b) defines the TT buying rate as the rate adopted by the State Bank of India for buying that currency made available through telegraphic transfer, having regard to Reserve Bank of India guidelines. That means one rate source (SBI), one rate type (TT buying, not the TT selling rate, not the card rate and not the RBI reference rate) and one date fixed by the rule.

Rule 206(2)(b)(i): the specified date for each head of income

The table in rule 206(2)(b)(i) sets six specified dates. They are reproduced below from the notified text:

Rows 5 and 6 matter most for an RSU holder. A dividend paid on 15 August is converted at the SBI TT buying rate of 31 July. A sale of shares executed on 10 March is converted at the rate of 28 February (or 29 February in a leap year). The trade date, the settlement date and the date the money lands in your Indian account are all irrelevant to this step under the table.

Rule 206(2)(b)(ii): where tax was deducted

Rule 206(2)(b)(ii) carves out one exception. Where tax was deducted from the foreign-currency income under rule 207, the specified date is the date on which tax was required to be deducted, not the date in the table. Rule 207(1) covers TDS on income payable in foreign currency in three situations: payment to an assessee outside India, payment to an IFSC Unit, and payment by an IFSC Unit to an assessee in India. In each case the deductor uses the SBI TT buying rate on the date tax is required to be deducted, or the last published rate if none was published that day.

For most residents receiving dividends from a US company through a US broker, no Indian deductor is involved, so the table in rule 206(2)(b)(i) applies. Withholding by the US payer under its own law is not deduction "under rule 207".

Rules 206 and 207 at a glance

Worked Example

Consider Priya, a resident and ordinarily resident taxpayer (see residential status) with an Indian salary of Rs 30,00,000 in tax year 2026-27. Her employer's US parent granted her RSUs, which vest and are held in a US brokerage account. During the year she has three foreign-currency events:

Step 1: pick up the right rate for each date

For each specified date in the last column, Priya looks up the SBI TT buying rate for the US dollar on that date. This article does not quote SBI figures; the rate must be taken from SBI's published card for the exact date. Call the three rates R1 (31 July 2026), R2 (31 October 2026) and R3 (28 February 2027).

Step 2: convert

The dividends are taxed with her other income at her slab rate. The capital gain is computed in the year of transfer; use the capital gains calculator once you have the rupee figure, and note that shares listed abroad are not listed on a recognised Indian stock exchange, so the concessional treatment for Indian listed equity may not apply.

Step 3: why the exact date matters

Small rate differences add up. Every Rs 1 difference in the rate on USD 6,000 shifts her taxable gain by Rs 6,000. On the two dividends totalling USD 800, a Rs 1 error moves income by Rs 800.

Assume Priya stays in the new regime and the FY 2025-26 slabs (30% above Rs 24,00,000) continue. With a salary of Rs 30,00,000, every extra rupee of dividend income is taxed at 30% plus 4% health and education cess, an effective 31.2%. If the gain is taxed at her slab rate, a Rs 6,000 understatement from using the wrong date would understate tax by Rs 1,872 (Rs 6,000 x 31.2%). The amount is small, but such mismatches are what reconciliation queries pick up. Run the full picture through the income tax calculator or compare regimes with the old vs new regime tool.

Step 4: report

The rupee figures go into the relevant schedules of the return, with the foreign income also reflected in Schedule FSI and the holdings in Schedule FA for a resident and ordinarily resident individual. Keep a one-page working file showing each event date, the specified date, the SBI TT buying rate used and the multiplication, because that file is what you will rely on if a notice arrives two years later.

Common Mistakes

The following five pitfalls commonly break rupee conversion under rules 206 and 207.

1. Using the RBI reference rate or Google rate. Rule 207(3)(b) names SBI's TT buying rate. The RBI reference rate, a currency-converter website and your bank's card rate are all different numbers, and none is the rate the rule prescribes.

1. Using the TT selling rate. SBI publishes both buying and selling rates for each currency. Rule 206(1) specifies the buying rate. The selling rate is higher for a foreign-currency purchase and overstates income; mixing them across events creates inconsistency within the same return.

1. Converting on the payment date. Under row 5, a dividend paid on 15 August is converted at the 31 July rate, not the 15 August rate. Under row 6, a share sold on 10 March is converted at the rate on the last day of February. Using the event date is the single most common error.

1. Applying the TDS exception where no Indian TDS exists. Rule 206(2)(b)(ii) applies only where tax was deducted under rule 207. Foreign withholding by a US payer does not move the specified date to the withholding date.

1. Applying the new Rules to the wrong year. The 2026 Rules took effect on 1 April 2026. A return for FY 2025-26, filed in 2026, still follows rule 115 of the Income-tax Rules, 1962. Check which set of Rules governs the year you are filing for.

Relief for US withholding under the DTAA also depends on getting rule 206 right first. For domestic TDS questions, see the TDS calculator.

FAQ

Which exchange rate do I use to convert US dividends into rupees from 1 April 2026?

Use the SBI TT buying rate for the US dollar under rule 206(1) and rule 207(3)(b) of the Income-tax Rules, 2026, on the last day of the month immediately preceding the month in which the dividend is declared, distributed or paid (row 5 of the rule 206(2)(b)(i) table).

Which date applies when I sell RSU shares on a US exchange?

Row 6 of the table applies: the last day of the month immediately preceding the month in which the capital asset is transferred. A sale on 10 March 2027 is converted at the SBI TT buying rate of 28 February 2027.

What if SBI did not publish a rate on the specified date?

For TDS conversions, rule 207(1) says to use the last published rate where no rate is available for that date. Keep evidence of which published rate you relied on and why.

Does US tax withheld on my dividend change the conversion date?

No. Rule 206(2)(b)(ii) shifts the specified date only where tax was deducted under rule 207, which covers specified payments by Indian or IFSC deductors. A US payer's withholding is not deduction under rule 207, so the row 5 date continues to apply.

Can I use the RBI reference rate if it is easier to find?

No. Rule 207(3)(b) defines the TT buying rate as the rate adopted by the State Bank of India. Using any other source departs from the 2026 Rules, even if the difference is a few paise per dollar.

Do these rules apply to my return for FY 2025-26?

The Income-tax Rules, 2026 are effective from 1 April 2026. Income of FY 2025-26 was governed by the Income-tax Rules, 1962, where rule 115 dealt with conversion. Confirm the applicable rule against the notified text on incometax.gov.in and the statute on indiacode.nic.in.

Where do I report the converted figures?

A resident and ordinarily resident individual reports the income in the relevant schedules, Schedule FSI for foreign-source income, and the foreign shareholding in Schedule FA. The rupee values in these schedules should match the working file built using rule 206.

Source: Income-tax Rules, 2026 (G.S.R. 198(E), 20 March 2026), rules 206 and 207, as published by the Income Tax Department. This article is general information, not tax advice; check the notified text and SBI's published rate for your exact dates.