In absence of any agreement, partners are liable to receive interest on loan at the rate of:

Question

Accepted Answer

The correct option is 3:
The correct option is .50% per month simple interest. This rate is derived directly from the fundamental provisions of the Indian Partnership Act, 1932, which governs the rights and duties of partners in the absence of a Partnership Deed. Specifically, Section 13(d) of the Act mandates that a partner who advances a loan to the firm, over and above their capital contribution, is legally entitled to interest at the rate of **6% per annum** simple interest. To convert this statutory annual rate to a monthly rate, we simply divide 6% by 12 months, which precisely yields a rate of 0.5% per month, or **.50% per month**. Therefore, the correct option accurately represents the legal provision on a monthly basis. This interest on a partner's loan is treated as a charge against profits, meaning it must be paid to the partner even if the firm incurs a loss.

The incorrect option is 1:
The option 6% simple interest is often selected, as the statutory rate for a partner's loan is indeed 6%. However, the law specifies this rate as **6% per annum** (p.a.). While mathematically correct, the option is less precise without the "per annum" qualifier. Since option 3 provides the mathematically equivalent rate on a monthly basis (.50% per month), which is unambiguous, the intended answer is the most precise available option that matches the statutory provision.

The incorrect option is 2:
The rate of 12% simple interest is incorrect because it is double the rate legally permitted in the absence of a formal agreement. A partner is only entitled to a higher rate like 12% interest on their loan if there is a specific, clear provision to that effect in the Partnership Deed. Without such an explicit clause in the document, the firm is legally bound to the 6% per annum (or 0.50% per month) rate as per the Partnership Act.

The incorrect option is 4:
The option None of these is incorrect because, as established, the rate of .50% per month simple interest is the exact monthly equivalent of the 6% per annum simple interest mandated by the Indian Partnership Act, 1932. Since a correct and legally valid rate is explicitly presented as Option 3, the final option is automatically eliminated.