Interest to Partners

santhosh (CA) (636 Points)

10 December 2009

Hi There

Can interest to Partner be provided if he has Debit Balance (Current A/c) in the Firms Books?

If no Why?

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3 Replies

Prabeer (B. COM (H) CA & CS Final) (5484 Points)
Replied 10 December 2009

Yes, the partner is very much eligible for interest on the capital introduced.

santhosh (CA) (636 Points)
Replied 10 December 2009

He has negative Balance (Dr ) Balance in Firms Books.

Mohammed Dalal (Chartered Accountant) (163 Points)
Replied 11 December 2009

According to section 40 b following condition have to be followed

1.Interest payment should be authorize by partnership deed

2.Should pertain to partnership deed period and

3.Rate of Interest should not exceed 12 %

Thus there is no provision that the interest should not be paid to the partner if he has any debit balance in his account.

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