Interest on partner capital

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 March 2013 I am in a partnership firm where there are 2 partners whose profit sharing ratio is equally between both.
My question is how do i calculate the interest on the partners capital ??

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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25 March 2013 It will be depending on the agreement at the time of starting of partnership. That means based on the partnersheep deed. If partnership deed allowing to pay interest on partner's capital then pay interest according to the rate and method specified in such deed.

However as per the income tax act it will be allowable maximum of 12% of interest on partner's capital subject to partnership deed as deduction of exependiture from the firm's profit.

OM SAI SRI SAI JAI JAI SAI

Querist : Anonymous

Querist : Anonymous (Querist)

25 March 2013 If no rate has been specified in the agreement so what shall i consider and how do i calculate the same

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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25 March 2013 Is there is any clause or condition in the deed as specifing interest on partner's capital will be allowable according to the income tax act or its provisions. Then you can pay interest upto 12% otherwise not possible.

Also specify the conditions which are in the partnership deed which are related to payment of interest on partner's capital.

Is any condition in partnership deed relats to payment of interest on partner's capital then please post that condition.

OM SAI SRI SAI JAI JAI SAI

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