Question

Interset on Capital is allowed

Answer 1

Answer:

Interest on Capital meaning

It is similar to obtaining a loan from any financial institution. The partners are paid interest on the capital that remains outstanding. The maximum rate of interest that can be paid to the owners is 12% as per the Income Tax Act u/s 40(b).

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Answer 2

Intrest on capital is allowed to the partners on their opening capital because the maximum tax rate posed on the capital is only around 12%.

Explanation:

The opening capital in offered to the employees with his intrest.This is the maximum intrest level and it cannot be changed

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