Interest on Capital in a Partnership Firm

Amit

The remmuneration paid to the directors is taken on the NP

their is no use of Interest on Capital

Abhay there is no director in the partnership firm.

 If there is inadequate profit as in the case mentioned by you.

No remuneration is provided to partner (eg. salery etc.) But if ity is agreed between the partners to provide interest on capital then that inadequate profit is distributed among the partners in their capital ratio.

Note: - This rule is applicable only in the case where the profits are inadequate i.e; Interst on capital is more than the net profit.

Directors are for Companies and not for partnership.

However if it is a company, it may dealt as follows:-

While calculating remuneration for M.D's you calculate NP under section 349 of Companies Act.

U/s 349 you take GP and deduct only those items which are allowed by 349 and add only those which are allowed.

As far as I remember 'interest on capital' is not taken into consideration.

Hope I am right, lol!

MR. CA DHIRAJ SINGH IS RIGHT.

Thank you sir

I want how to calculate interest on capital in a partership fim having any rate of interest.