Read the following passage and answer the following question.

Shivay and Nitya are partners sharing profits and losses in the ratio of 7: 3. Their Capital Accounts as on 1st April, 2021 stood at Shivay- 5,00,000, Nitya- 4,00,000. Both partners are allowed interest on capital @ 5% p.a. Drawings of Shivay and Nitya during the year ended 31st March, 2022 were ₹72,000 and ₹50,000 respectively. Profit for the year before allowing interest on capital and salary to Nitya @6000 per month amounted to ₹8,00,000. 10% of the divisible profit is to be set aside as General Reserve.

Calculate interest on capital of Shivay?

₹25,000

The correct answer is option 2- ₹25,000.

Capital of Shivay = ₹5,00,000
Rate of interest is 5% p.a.
Interest = 5,00,000 x 5/100
              = ₹25,000