Interest to Partners

Tax queries 450 views 3 replies

 Hi There

Can interest to Partner be provided if he has Debit Balance (Current A/c) in the Firms Books?

If no Why?

Replies (3)

Yes, the partner is very much eligible for interest on the capital introduced.

 He has negative Balance (Dr ) Balance in Firms Books.

According to section 40 b following condition have to be followed

1.Interest payment should be authorize by partnership deed

2.Should pertain to partnership deed period and

3.Rate of Interest should not exceed 12 %

Thus there is no provision that the interest should not be paid to the partner if he has any debit balance in his account.


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