diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index 6ec15e1e87..eb2019bdf0 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -946,11 +946,11 @@ class PaymentEntry(AccountsController):
 			tax.base_total = tax.total * self.source_exchange_rate
 
 			if self.payment_type == 'Pay':
-				self.base_total_taxes_and_charges += current_tax_amount * self.source_exchange_rate
-				self.total_taxes_and_charges += current_tax_amount * self.target_exchange_rate
+				self.base_total_taxes_and_charges += flt(current_tax_amount / self.source_exchange_rate)
+				self.total_taxes_and_charges += flt(current_tax_amount / self.target_exchange_rate)
 			else:
-				self.base_total_taxes_and_charges += current_tax_amount * self.target_exchange_rate
-				self.total_taxes_and_charges += current_tax_amount * self.source_exchange_rate
+				self.base_total_taxes_and_charges += flt(current_tax_amount / self.target_exchange_rate)
+				self.total_taxes_and_charges += flt(current_tax_amount / self.source_exchange_rate)
 
 		if self.get('taxes'):
 			self.paid_amount_after_tax = self.get('taxes')[-1].base_total
diff --git a/erpnext/accounts/doctype/payment_entry/test_payment_entry.py b/erpnext/accounts/doctype/payment_entry/test_payment_entry.py
index cc3528e9aa..349b8bb5b1 100644
--- a/erpnext/accounts/doctype/payment_entry/test_payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/test_payment_entry.py
@@ -633,6 +633,45 @@ class TestPaymentEntry(unittest.TestCase):
 		self.assertEqual(flt(expected_party_balance), party_balance)
 		self.assertEqual(flt(expected_party_account_balance), party_account_balance)
 
+	def test_multi_currency_payment_entry_with_taxes(self):
+		payment_entry = create_payment_entry(party='_Test Supplier USD', paid_to = '_Test Payable USD - _TC',
+			save=True)
+		payment_entry.append('taxes', {
+			'account_head': '_Test Account Service Tax - _TC',
+			'charge_type': 'Actual',
+			'tax_amount': 10,
+			'add_deduct_tax': 'Add',
+			'description': 'Test'
+		})
+
+		payment_entry.save()
+		self.assertEqual(payment_entry.base_total_taxes_and_charges, 10)
+		self.assertEqual(flt(payment_entry.total_taxes_and_charges, 2), flt(10 / payment_entry.target_exchange_rate, 2))
+
+def create_payment_entry(**args):
+	payment_entry = frappe.new_doc('Payment Entry')
+	payment_entry.company = args.get('company') or '_Test Company'
+	payment_entry.payment_type = args.get('payment_type') or 'Pay'
+	payment_entry.party_type = args.get('party_type') or 'Supplier'
+	payment_entry.party = args.get('party') or '_Test Supplier'
+	payment_entry.paid_from = args.get('paid_from') or '_Test Bank - _TC'
+	payment_entry.paid_to = args.get('paid_to') or 'Creditors - _TC'
+	payment_entry.paid_amount = args.get('paid_amount') or 1000
+
+	payment_entry.setup_party_account_field()
+	payment_entry.set_missing_values()
+	payment_entry.set_exchange_rate()
+	payment_entry.received_amount = payment_entry.paid_amount / payment_entry.target_exchange_rate
+	payment_entry.reference_no = 'Test001'
+	payment_entry.reference_date = nowdate()
+
+	if args.get('save'):
+		payment_entry.save()
+		if args.get('submit'):
+			payment_entry.submit()
+
+	return payment_entry
+
 def create_payment_terms_template():
 
 	create_payment_term('Basic Amount Receivable')