Interest on capital to partners in LLP allowed or not?

A Pvt. ltd. company is converted into LLP in Oct 2017 adhering to conditions laid down in section 47 of IT Act.

Is interest on partner's capital allowed in 2019-20 so that there is no contravention to the above section?

Please help experts.

The LLP deed allows for the interest on partner's capital @ 12% per annum.

Replies (2)
Quick Summary
This discussion explores whether interest paid on capital contributed by partners in a Limited Liability Partnership (LLP) is allowed for tax purposes. The query specifically arises after a Private Limited company converted into an LLP, questioning potential contraventions of Section 47 of the IT Act. While the LLP deed permits interest at 12%, the core concern is its deductibility for the LLP and taxability for the partners without violating conversion provisions.

It'allowed to the extent of 12%(For LLP ).In the hands of partners it will be taxable.
Originally posted by : Santosh Hegde
It'allowed to the extent of 12%(For LLP ).In the hands of partners it will be taxable.

 

But it will contravene the provisions of section 47(iii) of IT Act? Right?

 

 

 

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