Out of which interest on capital will be paid to partners by a partnership firm if it is allowed in partnership deed?

Profits

The correct answer is option 1- Profits.

Interest on capital is provided out of profits only, if there is a loss then it will not be provided.

In a partnership firm, Interest on capital is an amount paid to partners on the capital they have invested in the business. It is considered an appropriation of profit, meaning it is allowed only if there is profit.