40(b)

While calculating 12% Interest on capital as per section 40(b),i need a clarification for basis of computation of 12%

wheather it is on opening capital or after drawings or after additions or closing balance or

proportionatly  i.e

for eg:1/4/2012- Opening balance :30000  =30000*3/12*12%=           900

            1/7/2012 -Additions              :30000  =60000*2/12*12%=         1200

           1/9/2012 -Drawings              :10000  =50000*7/12*12%=         3500

                                                                                                   ----------

                                                          total deduction available          5600

and if capital balance is NEGATIVE what shouli i do?

Replies (2)

IT IS ON A PROPORTIONATE BASIS

It is on proportionate basis and on negative capital no interest will be allowable

correct me if i am wrong

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