Differences in FOREX rates bet. 2021 & 2022 led to decrease in foreign CD value in USD, despite earning interest in INR. Do I still need to declare interest income?

[ps333]

IRS provides yearly average FOREX rates to convert balances and interest into US dollars. If my balance at the end of the year is less than that in the year before, do I still need to pay taxes on my interest income?
Which way is the correct?

Example: 

If the certificate of deposit value increased from 95,000 INR at end of 2021 to 1,00,000 INR at end of 2022, then how should i show my interest income:
Option 1: Convert to USD using foreign exchange rates for each year, and calculate the difference. In this case , at end of 2021, the USD balance is $1285 and at end of 2022, the balance is $1272. Therefore, no interest earned. So no need to declare.

Option 2: Convert the difference in the balance in foreign currency to USD using 2022's foreign exchange rate.
In this case, it is (1,00,000-95,000) / 78.598 = 64$

[DaveF1006]

Even though the CD's declined in value, you still need to report interest earned from the CD, if interest was earned on the declining balance.  It's like receiving a 1099 INT for a savings account that has declined in value from one year to the next. the interest may not be as much in the declining year but still reported as income. 

The best way to report is to report  interest income from a CD is by going to federal>wages and income>interest and dividends>interest on 1099 INT. Don't be concerned if you don't have a 1099 INT because you may still report that here.