In a ₹160000 loan ₹40000 principal is paid after 4 months. On what amount will interest be charged for next 8 months?

Correct answer: ₹120000

Interest on a loan is calculated on the principal that remains outstanding during the relevant period. At the beginning, the loan is ₹1,60,000. After four months, the partner repays ₹40,000 of principal, so the unpaid balance becomes ₹1,60,000 − ₹40,000 = ₹1,20,000.

For the next eight months, no longer is the original ₹1,60,000 outstanding; only ₹1,20,000 remains payable. Therefore, interest for those next eight months is charged on ₹1,20,000, making option A correct. The ₹40,000 amount is the part already repaid, not the remaining principal. The original amount would be used only for the first four months, unless the question specifically stated that the repayment did not reduce the interest-bearing balance.