Calculation of interest on capital borrowed for business

Save Share

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2011 X takes a shop with rent @ Rs. 25000 per month from Landlord Y on 1-4-2011.

X takes a loan of Rs.5 Lacs from Landlord Y @ 18% pa. Also the monthly rent of Rs. 25000 is to be credited to the Loan account.

My question is

How will be the Interest calculated fro period of 1-4-2011 to 31-3-2012?

1. Whether 18% annual Interest on Rs. 500000 and 1.5% monthly Interest on Rs. 25000 per month ?

OR

2. Whether 1.5% monthy Interest on Monthly Loan a/c Balance ?

OR

Any other Way

Please Guide.

anurag

anurag (Expert)
Follow

09 December 2011 Practically it depends upon the nomenclature of the agreement.
however as per the language of ur question, it will be calculated 18% p.a. on inr 5 lacs and will not be neted off from the rent creidited per month.

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2011 X has to pay interest on the monthly rent amount credited in the Loan Account. This is under Agreement.

I have asked that whether interest will be calculated on the monthly additions ?

(whether is allowable in Income Tax Act ? )

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now