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Interest on Capital in absence of any clause in Partnership Deed


Monika (Senior Team member)     02 July 2020

Monika
Senior Team member 
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We are a partnership firm of two partners. One partner has contributed more than 3/4th capital. In absence of any clause in partnership deed regarding interest on capital, can we give interest on capital to only one partner who has contributed most. This is will be as per mutual understanding of both partners, since profit of firm is very less , it being first year of the firm. Please advise. Thanks in advance

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yasaswi gomes   05 July 2020

yasaswi gomes

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If the deed mentions or not, it is unfair towards other partner. But, since it is a startup, you can do what you have suggested. However, it looks like you need it written in the deed. 

https://www.taxadda.com/remuneration-and-interest-to-partners-section-40b/

https://www.charteredclub.com/section-40b/

 

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yasaswi gomes   05 July 2020

yasaswi gomes

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Sorry, forgot to mention one important aspect, you will be given allowance and disallowance based on the criteria of registering under partnership act and making a deed. That is important because, it will impact net profits. This is some kind of company law I think.


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