Study Material & Notes for the Chapter 7
Partnership - Death of a partner
IV. SETTLEMENT OF EXECUTOR’S CLAIM
A. Settlement of Deceased Partner’s Executor’s Claim – In Lumpsum
Deceased partners’ executor’s claim is paid either out of the funds available with the firm or out of funds brought in by the remaining partners.
B. Settlement of Deceased Partner’s Executor’s Claim – In Installments
- Amount due to deceased partner’s executor is paid in instalments. Usually, some amount is paid immediately and the balance is transferred to his loan account.
- This loan is paid in one or more instalments and the loan amount carries some interest.
- In the absence of any agreement on interest rate, the retiring partner can claim interest @ 6% [as per Section 37 of the Indian Partnership Act 1932]
- Installment has two parts – Principal Amount of Loan and Interest at agreed rates
- Interest due on loan amount is credited to deceased partners’ executor’s loan account.
- Instalment inclusive of interest then is paid to the deceased partner’s executor as per schedule agreed upon.