Interest to partners

This query is : Resolved

Bhaskaran Chackrapani Warrier (Querist)
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16 September 2008 Can a partnership firm pay interest on the credit balance of partners current account.If so will such interest is allowed as an expenditure in the hands of the firm subject to the limitations u/s 40(b) of the IT Act,1961.

CA Pawan Goswami

CA Pawan Goswami (Expert)
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16 September 2008 Yes a Partnership Firm can pay interest on current account to its partner's and it is allowed as an exp. in income tax subject to the provisions of sec. 40(b) of Income Tax Act, 1961.

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)
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16 September 2008 Yes, if it according to partnership deed and within the limits of section 40(b) of Income Tax Act 1961.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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17 September 2008 Allowed To Working Partner Only.

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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17 September 2008 Interest can be paid to partners as per the relevant clause of partnership deed, but the maximum amount permissible under Income Act is 12% p.a. on the Capital of the partner.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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17 September 2008 But Allowed To Working Partner Only.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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10 June 2009 No, interest on current a/c of partners is not an allowable expenditure.

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