When the partnership deed is silent on any matter, the provisions of the Indian Partnership Act, 1932 apply.
As per Section 13 of the Indian Partnership Act, 1932, when the partnership deed does not mention anything about interest on capital, no interest on capital is payable to any partner.
Partners are entitled to interest on capital only when:
- It is specifically provided in the partnership deed, OR
- There is a mutual agreement among partners
Important distinction: Students often confuse this with interest on partner's loan. When a partner gives a loan (over and above capital) to the firm and the deed is silent, interest @ 6% p.a. is payable on such loan. However, for capital contribution, no interest is allowed unless specified in the deed.
Therefore, Option 1 is correct → No interest on capital is payable when the partnership deed is silent.