External Currency Borrowing

[CABIJENDERKUMAR BANSAL]

Dear Sir,

Our company is having ECB (external currency borrowings) from Japan.

What is the overall compliance required for ECB loan.

Further we have made currency swap with bank for securing movement in USD. So Interest rate and principal amount is fixed in INR terms. ( How accounting will be made for extra interest paid in INR.)

We have taken this loan for a project, whether Interest can be capitalized in that project.

Project is final to be set up but still No land and machinery is purchased. travelling is being done for ensuring all the facilities and negotiation is going on for purchasing land and other things.

What is treatment:-

Companies act,

Income tax act,

RBI

Kindly calrify.

[DR.MARIAPPAN GOVINDARAJAN]

Detailed analysis is to be done in your case. Better consult the consultant.

AI Summary

External currency borrowing compliance: accounting and capitalization issues from currency swaps affecting INR obligations.
External currency borrowing with a cross currency swap converted into INR raises issues on ECB compliance, accounting for extra INR interest from the swap, and whether interest may be capitalized into project costs while the project remains in pre construction without land or machinery; the query requests treatment under company law, income tax law, and central bank regulations and notes case specific professional advice is required.