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How to calculate interest on late payment & adjust received payment against outstanding / interest amount?


06 October 2017 Atin Palekar, Mumbai

A member in our society has not paid maintenance amount for the past 4 months. Assuming monthly maintenance amount of Rs. 1000/- and interest rate of 18% p. a., the society has charged interest to the member as follows
Month 1 : Arrears - 0, Current - 1000, Total - 1000
Month 2 : Arrears - 1000, Current - 1015 (Interest - 15), Total - 2015 (Interest - 15)
Month 3 : Arrears - 2015 (Interest - 15), Current - 1030 (Interest - 30), Total - 3045 (Interest - 45)
Month 4 : Arrears - 3045 (Interest - 45), Current - 1045 (Interest - 45), Total - 4090 (Interest - 90)
Firstly, I would like to know if the above interest calculation is correct as per regulations.

Further to this, the member now makes a payment of Rs. 3500/-.
Should this payment be adjusted against the outstanding principal amount first or against the interest first? Alternatively, which of the below Month 5 calculations reflect proper adjustment of the payment against dues?
Option 1 : Arrears - 590 (Interest - 90), Current - 1007.5 (Interest - 7.5), Total - 1597.5 (Interest - 97.5)
Option 2 : Arrears - 590 (Interest - 0), Current - 1008.85 (Interest - 8.85), Total - 1598.85 (Interest - 8.85)
Option 3 : Arrears - 590 (Interest - 45), Current - 1008.18 (Interest - 8.18), Total - 1598.18 (Interest - 53.18)

Society Maintenance Charges


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