Interest to Partners
Querist :
Anonymous
(Querist) 11 November 2010
This query is : Resolved
Is it neccesary that interest on Capital,Loan,Advance and Deposit be paid to Partners if the Books of the Firm show Profit? What is the situation in the case of a loss ?
Are Capital,Loans,Deposits and Advances brought in by the Partners treated similarly with regard to interest/
Querist :
Anonymous
(Querist) 11 November 2010
Section 13 of the Indian Partnership Act states thatSubject to contract between the
partners -
i) Where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out
of profits.
ii) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has
agreed to subscribe, is entitled to interest thereon at the rate of six per cent, per annum.
Pls confirm taht in a loss situation no interest on Capital can be paid.Further,please confirm that any advance,loan or a deposit for the purpose of business shall be eligible for interest at 6% p.a. even if there is a loss.
Chanchal Nag Chowdhury
(Expert) 11 November 2010
Payment of interest on Capital brought in by partners has got nothing to do with the profit/loss in business. It is a charge on the firm.
Debasish Hota
(Expert) 11 November 2010
Totally depends on the Partnership Deed.
