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Hi There
Can interest to Partner be provided if he has Debit Balance (Current A/c) in the Firms Books?
If no Why?
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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