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Interest to partners

This query is : Resolved 

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.


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.

Yes, if it according to partnership deed and within the limits of section 40(b) of Income Tax Act 1961.

Allowed To Working Partner Only.

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.

But Allowed To Working Partner Only.

No, interest on current a/c of partners is not an allowable expenditure.


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