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Interest on borrowed fund in individual capacity in firm

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Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2013 when funds are borrowed in partner individual capacity and invested in the firm , also firm earn profit which is exempt u/s 10 (2) , can interest paid on the borrowed fund which is contributed in firm as a capital claim for the deduction? or to claim the deduction on borrowed fund by partner in his individual capacity , what should be do for taxplanning under income tax act?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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17 November 2013 problem is that since both:

1. income of the firm under 10(2)

and

2. income of the partner from the firm

are tax exempt

So it doesn't matter who claims the expense, it won't reduce the tax liability.

So why bother.

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