Interest to partner u/s 40(b)

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Kishan Joshi (Querist)
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22 July 2014 Interest to partner allowable is 12% per annum simple interest. And if paid more than 12% then it is disallowed to the firm.

But the question is on which 12% calculated?
Whether it is on Openning Capital or Average Capital or Closing Capital?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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22 July 2014 that will be as per partnership deed - relevant clause.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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22 July 2014 partner ship deed should provide the method for calculating the interest. If not provided, opening will be best option.

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Kishan Joshi

Kishan Joshi (Querist)
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23 July 2014 There is no such type of declaration in deed then...????

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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23 July 2014 then it is better u take it on avg to be on safer side.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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23 July 2014 as per your option and convenience of calculating the interest, you may choose any of the method. But remember, it should be followed consistently unless there is need for the change of the method.