Interest on loan from partners allowed as deduction ..??
n if not why ??
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Assessment of firm
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1. As per section 40(b) only that salary, remuneration, bonus, commission etc payable to working partners or any payment of interest payable to any partner will be allowed as deduction only if it is authorized by the partnership deed. If the partnership deed does not contain such provisions then the deductions may be disallowed if the same is claimed by the partnership firm.
2. Same not allowed when firm assessed under presumptive scheme.
the limit prescribed under sec 40(b) i.e up to 12% int. allowed
Is this limit also applicable on int. on loan ??!
Is this limit also applicable on int. on loan ??!
No. That is for partner's capital investment.
Partners are entitled to receive interest at an agreed rate of interest on any Loan given by them to the firm. Interest on Loan is a charge against profits so a partner is entitled to receive interest wheather there are profits or not. If there is no agreement regarding the rate of interest, it is taken as 6% p.a.
Sir, plz show me this provision
The provision is as per Partnership act.
As per income tax act, u/s. 40(b) it is restricted to 12% only.
Interest on fixed capital or working capital or loan will be allowed only when it is specifically stated and authorized in the partnership deed
Income tax limits the rate to 12%
Income tax limits the rate to 12%
Chaudhry prakashan,jaipur question 4
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