Question

How much interest is payable on the loan of a partner in the absence of partnership deed?

Hint:

Without a deed, partner's loan always earns 6% interest as per Partnership Act.

Answer 1

The Indian Partnership Act, 1932 defines several default rules which automatically apply when there is no written deed. One such rule specifies that if a partner gives a loan to the firm separate from his capital, he is entitled to an interest at 6% per annum. This interest is a priority payment and must be given even if the partnership makes a loss. The Act ensures fairness by compensating partners who extend financial support to the firm. All other interest-related matters, like interest on capital or drawings, depend on the deed, but interest on loan always defaults to 6%.