Read the following passage and answer the question.

X, Y, Z were partners sharing profits and losses in the ratio of 4:3:2. Z retired on 1st July, 2021 on which date the capitals of X, Y, Z after all necessary adjustments stood at ₹75,000, ₹65,000 and ₹45,000 respectively. X & Y continued to carry on the business for 6 months without settling the account of Z. During the period of 6 months ended 31st December, 2021, a profit of ₹50,000 is earned by the firm.

How much interest will be provided to partner Z on his balance amount?

6% p.a.

The correct answer is option 1- 6% p.a.

6% p.a. interest will be provided to partner Z on his balance amount.

If there is no specific agreement regarding the payment terms, Section 37 of the Indian Partnership Act, 1932 is applicable. Under this section, the outgoing partner has the option to choose one of the following methods of settlement:
Option 1: The outgoing partner can receive interest at a rate of 6% per annum on the amount due, calculated until the date of payment.
Option 2: Alternatively, the outgoing partner can opt to receive their share of profits earned with their money, based on the capital ratio.