Eligible u/s 40(b), Partners interest on capital paid 2 out of 5

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This discussion addresses whether a firm can pay interest on capital to only two out of five partners, specifically under Section 40(b). The key consideration is adhering to the partnership deed's clauses. It's generally necessary to credit interest on capital to each partner's individual capital account, even if only a portion is paid out.

Ravichandran P

Ravichandran P (Querist)
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19 June 2023 The firm having 5 partners. This situation, we are calculated and paid the interest on capital to only 2 partners capital. Is eligible U/s. 40(b) to give interest on capital to that 2 partners.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 June 2023 Only upto the apportioned amount of the total amount payable to all the capital interest.

Ravichandran P

Ravichandran P (Querist)
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19 June 2023 Sir, Is it possible to give the interest only 2 partners.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 June 2023 As such you have to follow the clause as specified in Partnership deed.
At least you need to credit the interest over capitals invested by each partner to respective partners' capital account.

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