Interest on Capital u/s 40(b)

Others 1979 views 8 replies

hello friends

 

my query is on which amt of capital of the partner does the interest is calculated?

  1. opening balance
  2. closing balance
  3. monthle basis

 

is there any provision under sec 40(b) which describes about the above query?

Replies (8)

IT IS TO BE CALCULATED ON NO. OF DAYS BASIS                        

It is calculated on average basis for the whole year.

no. of days basis......no this is not specifically mentioned in the section 

Act doesnot specify about the days. it just fixed a maximum celing of 12% per annum. so u can pay till that limit subject to the conditions in partnership deed.

IT IN ON OPENING BAL i.e Closing bal of Previous Balance  AND MAX SHOULD NOT EXCEED 12%
 

On the Opening Balance

Nothing has been specified in this respect in the Act. However normally it is calculated on Opening balance of capital a/c.

Yes, it is not been provided in the provisions....

 

However, going by the logic, ideally, it is to be paid on the amount actually lent during the entire year.. In an instance where the partner has withdrawn the entire sum on 2nd day of the year, it is not logical to pay interest on the opening balance for the entire year. So I believe it is to be paid on daily balance...

 

 


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