Read the following information to answer.

Arun and Ram are partners in a restaurant business sharing profits and losses in capital ratio. Their fixed capital from the beginning of the firm was ₹2,00,000 and ₹1,50,000 respectively.

The profit for the year ended 31 March 2022 before the appropriation of Salary and Interest on Capital was ₹2,20,000. Ram is allowed a salary of ₹ 2,000 per quarter and interest on capital @ 10% p.a.

Due to the further expansion of the business, they decided to enter Sanjeev as a new partner for 1/5 share in profits. It was agreed that Sanjeev will bring ₹1,00,000 as capital and ₹50,000 as his share of Goodwill. It was decided that he will give ₹1,00,000 as loan to the firm for 3 years.

Rate of interest on loan given by Sanjeev will be:

6% p.a.

The correct answer is option 4- 6% p.a.

When no rate of interest is given, it is given as per provision of Indian partnership Act,1932 @ 6% p.a.

If there is no clause in the partnership deed of the partnership firm then the provisions of the Partnership Act, 1932 will be applicable. Some of the provisions are:
a) Profit Sharing Ratio: In the absence of a specified profit sharing ratio in the partnership deed, the profits and losses of the firm will be divided equally among the partners, regardless of their individual capital contributions.
b) Interest on Capital: Unless explicitly stated in the partnership agreement, partners do not have the right to claim interest on the capital they have invested in the firm.
c) Interest on Drawings: If the partnership deed does not mention anything about charging interest on drawings made by partners, no interest will be levied on such withdrawals.
d) Interest on Loan: If a partner has provided a loan to the partnership for business purposes, they are entitled to receive interest on the loan amount at a rate of 6 percent per annum.
e) Remuneration for Firm’s Work: No partner is entitled to get salary or other remuneration for taking part in the conduct of the business of the firm unless there is a provision for the same in the Partnership Deed.