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Interest on partners capital in case of loss

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(Querist)
07 October 2024 Whether interest on partners capital allowed in case of loss ?
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CA R SEETHARAMAN

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CA R SEETHARAMAN (Expert)
07 October 2024 Interest on capital is allowed only if there is profit.
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Pandy ji

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Pandy ji (Querist)
07 October 2024 Please provide an explanation about section applicable and related provision
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Pandy ji

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Pandy ji (Querist)
07 October 2024 Please provide an explanation about section applicable and related provision
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CA R SEETHARAMAN

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CA R SEETHARAMAN (Expert)
07 October 2024 Interest payable to partners
So far as allowability of interest paid by a firm to its partners under section 40(b) is concerned, the following conditions have been prescribed by section 40(b):

(1) The interest payable by a firm to its partners should be authorised by and in accordance with the partnership deed.

(2) The interest payable by a firm to its partners should not be for a period falling prior to the date of such partnership deed authorizing the payment of such interest.

In case the above conditions are fulfilled pay interest in case of loss.
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