IMPACT OF EXCHANGE RATE VOLATILITY ON TAX INCIDENCE FOR INDIAN IT COMPANIES: A COMPARATIVE ANALYSIS
DOI:
https://doi.org/10.29121/shodhkosh.v4.i2.2023.2058Keywords:
Exchange Rate Volatility, Tax Incidence, Indian IT Companies, USD/INR, Risk Management, Hedging, Foreign Income, Tax ExpenseAbstract [English]
This study investigates the impact of variations in the USD/INR exchange rate on the tax burden of Indian IT enterprises from 2019 to 2023. Exchange rate fluctuations can affect tax obligations by influencing the conversion of overseas income and the efficacy of hedging tactics. The research conducted an analysis using correlation and regression techniques on data from prominent IT companies like as Infosys, TCS, Wipro, Tech Mahindra, and HCL Technologies. The findings indicate a notable and positive relationship between fluctuations in currency rates and tax expenses. Infosys and TCS demonstrate the highest levels of correlation, with around 82.6% and 88.8% of their variation in tax expenses being accounted for by variations in exchange rates, respectively. These findings emphasize the importance of using efficient risk management methods, such as strategic hedging and the strategic placement of subsidiaries, to reduce the negative impact of currency fluctuations on tax-related financial factors. Further research could investigate the role of government policies in mitigating these risks.
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https://www.ofx.com/en-au/forex-news/historical-exchange-rates/yearly-average-rates/
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