In the absence of express agreement, interest @6% is provided on which of the following?

On loan given by partners to the firm

The correct answer is option 3- On loan given by partners to the firm.

According to the Indian Partnership Act, 1932, in the absence of an express agreement, interest at 6% per annum is allowed only on loans given by a partner to the firm, not on their capital.

If partnership deed is silent in respect of certain aspects, the relevant provisions of the Indian Partnership Act, 1932 become applicable. According to the Partnership Act, the partners share profits equally, no partner is entitled to remuneration, no interest on capital is allowed and no interest on drawings is charged. However, if any partner has given some loan to the firm, he is entitled to interest on such amount @ 6% per annum.

• ❌ Interest on Capital → It is allowed only if expressly mentioned in the Partnership Deed.

• ❌ Opening/closing capital balances have no relevance if there's no agreement about interest on capital.