What is interest on Capital?

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  • Feb 14th, 2007

Capital is the fund owner starts with the Business. To calculate the true profit owner charge Interest on the Capital which he/she started with the Business. Int. on Capital is the charge usually used in Pvt Ltd company.

As per Business entity concept Owner or proprietor treated as separate. The propritor gets interest from company on the invested capital for a specific period. This is taxable income to the proprietor and expenditure to the company


  • Nov 2nd, 2014

Who deduct the TDS amount and percentage of deduction?


  • Nov 14th, 2014

interest on capital is where the extra you receive on the total amount you invest in a business.

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Juma Ronald Lukonga

  • Apr 5th, 2015

This interest is treated as a deduction prior to the calculation of Profits and their distribution among the partners according to the Profit sharing ratio.

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  • May 6th, 2016

Interest provided by the business/firm to the business man is interest on capital. It is an expense to the business and is debited to the profit and loss account. If it is given by way of adjustment it will be added with the capital and shown on the liability side of the balance sheet.

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kohila ramachandran

  • Aug 22nd, 2017

How can interest be charged on capital. Capital is owners fund. If interest has to be taken then money should be put in the business as loan and not as capital so that interest can be charged on the loan amount till the loan amount is taken out from the company.

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  • Oct 4th, 2018

Basically Interest on Capital is an expense for the company. It is noted that the company and the business person both are distinct.

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Vinod kumar Reddy

  • Nov 22nd, 2018

Interest on capital is the expense to the company, Company has to pay to the interest on the capital invested by owner.
Accounting Treatment:
interest on Capital a/c DR
To proprietor/Owner a/c
Interest on capital will be charged to P/L on debit side.

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