Calculation of interest on capital borrowed for business

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2011 X takes a shop with rent @ Rs. 25000 per month from Landlord Y on 1-4-2011.

X takes a loan of Rs.5 Lacs from Landlord Y @ 18% pa. Also the monthly rent of Rs. 25000 is to be credited to the Loan account.

My question is

How will be the Interest calculated fro period of 1-4-2011 to 31-3-2012?

1. Whether 18% annual Interest on Rs. 500000 and 1.5% monthly Interest on Rs. 25000 per month ?

OR

2. Whether 1.5% monthy Interest on Monthly Loan a/c Balance ?

OR

Any other Way

Please Guide.

anurag

anurag (Expert)
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09 December 2011 Practically it depends upon the nomenclature of the agreement.
however as per the language of ur question, it will be calculated 18% p.a. on inr 5 lacs and will not be neted off from the rent creidited per month.

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2011 X has to pay interest on the monthly rent amount credited in the Loan Account. This is under Agreement.

I have asked that whether interest will be calculated on the monthly additions ?

(whether is allowable in Income Tax Act ? )

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