Currency movement is part of your tax bill

Indian capital gains rules compute your cost and sale price in INR using the spot rate on each date. A USD 100,000 position bought at INR 75 and sold at INR 85 generates a INR 10 lakh capital gain even if the dollar value never moved.

This works in both directions. A USD position that delivers 8% in dollar terms during a year when the rupee strengthened from 85 to 82 generates a tax INR gain meaningfully smaller than the dollar return. Operators planning realisations should model the FX leg.