Settlement of the Retiring or Deceased Partner's Account

Once every adjustment above has been made — capital, share of goodwill, revaluation profit/loss, share of reserves and accumulated profits/losses, and (for death) profit up to the date of death — the balance remaining in the outgoing partner's capital account represents the total amount due to them (or, on death, to their executor).

This amount can be settled in any of the following ways, as agreed between the parties:

1. Paid in full, immediately, in cash or by bank transfer.
2. Paid partly in cash, with the balance transferred to a Loan Account (a Partner's Loan Account on retirement, or an Executor's Loan Account on death), to be paid off later in a lump sum or in instalments.
3. Paid entirely by instalments over an agreed number of years.

Interest on the unpaid balance. Whatever balance remains unpaid and is carried forward as a loan must carry interest — as fixed by the partnership deed if it says so, or, in the deed's silence, under Section 37 of the Indian Partnership Act, 1932, which entitles the outgoing partner (or the executor, on death) to choose between: (a) interest @6% p.a. on the amount remaining unpaid, or (b) a share of the subsequent profits of the firm proportionate to their unpaid balance — whichever they find more beneficial. …