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Is interest on capital received by the partner have its limit of rate
Replies (2)
Usually 9% is considered fair
1. As per sec 40(b) interest on capital of the partners will be allowed as deductions provided it is authorized by the partnership deed and the rate of interest should not exceed 12% p.a.
2. So a firm cannot pay more than 12% p.a as "interest on capital" to partners. Over and above this rate will be disallowed at the time of computing income tax.
Please correct me if the above solution has an alternative view.
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