Which section of the Indian Partnership Act, 1932 states that the outgoing partner is provided with a choice to either receive interest at a rate of 6% per annum until the date of payment or receive a proportionate share of profits earned using their invested capital (based on the capital ratio)?

37

The correct answer is option 2- 37.

Upon the retirement of an outgoing partner, the settlement of their account is determined according to the provisions specified in the partnership deed. This settlement can occur either as a lump sum payment immediately or in multiple installments, with or without interest, as agreed upon. Alternatively, it can also be settled partially in cash at the time of retirement, with the remaining amount paid in subsequent installments at agreed intervals. In cases where there is no specific agreement in place, Section 37 of the Indian Partnership Act, 1932 comes into effect. This section grants the outgoing partner the option to choose between receiving interest at a rate of 6% per annum until the date of payment or receiving a proportionate share of the profits generated using their invested capital, based on the capital ratio. The total amount due to the retiring partner, determined after all necessary adjustments have been made, is to be promptly paid to them.