Partnership Deed — Drafting, Stamping & Registration
A partnership deed is the written agreement between partners that fixes capital, profit share, salary, interest and what happens when someone leaves. We draft it for your review, arrange e-stamping, and coordinate firm registration, PAN and GST.
What it is
A partnership deed is the document that governs a partnership firm. It names the partners, records each one’s capital, sets the profit and loss ratio and states the rules for running the business. Section 4 of the Indian Partnership Act, 1932 defines partnership as the relation between persons who agree to share the profits of a business carried on by all of them, or by any of them acting for all.
The deed can be oral, but a written and stamped deed protects everyone. It also feeds the tax rules, because interest and salary to partners are deductible only if the deed authorises them. If you are starting a new firm, see our partnership firm registration page. This page covers the deed itself, which is a separate job.
Who it applies to
New firms and family businesses
Two brothers in Faridabad open a trading shop together. The deed records who put in how much and how profit is split, so the family has nothing to argue about when profits come in.
Professionals and service partners
Consultants, architects and traders who work together need to fix who signs the bank cheques and who brings which clients.
Existing firms without a proper deed
A Ballabgarh hardware firm that has run on a handshake for ten years is a common case. A fresh deed puts the arrangement in writing and makes interest and salary deductible.
Why it matters
Fixes profit share and duties
Without a deed, the Act’s default rules apply. A written deed lets you choose your own ratio, salary and interest instead.
Makes tax deductions possible
Interest and remuneration to partners are allowed against the firm’s income only when the deed authorises them and within the legal limits.
Reduces disputes at exit
Retirement, death of a partner and dissolution are the moments when handshake deals fail. The deed tells everyone what to do.
Documents required
For the partners
- PAN and Aadhaar of each partner
- Address proof and passport-size photographs
- Capital each partner will contribute
For the firm
- Proposed firm name and business activity
- Principal place of business, with rent agreement or ownership proof and a utility bill
- Bank signing instructions and decision rules
For an existing firm
- Earlier deed, if any, and PAN of the firm
- Latest balance sheet and capital account
- Details of any change: new, retiring or outgoing partner
Clauses that matter in a partnership deed
The tax and legal limits are real. These are the main ones.
| Clause | What the law says |
|---|---|
| Number of partners | Maximum 50 (Companies Act, 2013, Section 464) |
| Interest on capital | Deductible up to 12% simple interest a year, if the deed authorises it |
| Partner salary | Working partners only; higher of ₹3,00,000 or 90% of book profit on the first ₹6,00,000, then 60% of the balance (ITA 2025, Section 35(e)) |
| Retirement | With consent of all, as per the deed, or by notice in a partnership at will (Section 32) |
| Registration | Optional, but Section 69 limits suits by an unregistered firm |
How it works
Settle the money terms first
We take the partners through capital, profit ratio, salary, interest, authority and exit. This talk heads off most later disputes.
Draft the deed
We prepare the deed with the clauses above, tailored to your firm. You and the partners review it and ask for changes.
Stamp and sign
We arrange e-stamp paper (₹1,000 for the instrument in Haryana) and the signing by all partners, with two witnesses.
Register the firm and set up accounts
We coordinate firm registration, apply for the firm’s PAN, and help with GST and a current account.
Timelines
Drafting: a few working days
Once partners agree the terms, the draft is quick. The time goes into reaching agreement.
Stamp before or at signing
Stamp duty is paid before or at the time of execution under Section 17 of the Indian Stamp Act.
Changes: record them promptly
Under Section 32, a retired partner stays liable to outsiders until public notice is given. Record changes at once.
What happens if you run without a proper deed
Default rules apply
With no deed, the Partnership Act’s default terms decide matters. You may not like the answer.
Deductions can be lost
Interest and salary to partners are not deductible unless the deed authorises them, and payments to non-working partners as salary are disallowed.
Weak position in a dispute
An unstamped deed is not admitted in evidence until duty and a penalty are paid (Stamp Act, Section 35), and an unregistered firm has limited rights to sue (Section 69).
Frequently asked questions
Is a partnership deed compulsory?
No. Under the Indian Partnership Act, 1932 a partnership can exist on an oral agreement. In practice you need a written deed, because a bank, a GST officer or the Income Tax Department will ask for it, and without one the Act’s default rules apply to profit sharing and interest. A written deed settles these points in advance. We draft it before the first transaction.
Does a partnership deed need to be registered?
The deed itself need not be registered with the Sub-Registrar. What is optional is registration of the firm with the Registrar of Firms (Section 58). Skipping it has a cost: under Section 69, an unregistered firm or its partners cannot sue third parties or each other to enforce contract rights. In Haryana, firm registration runs through the state’s Industries and Commerce Department portal. We handle both.
What stamp duty applies to a partnership deed in Haryana?
The instrument of partnership carries ₹1,000 stamp duty in Haryana (Article 46), and dissolution ₹100, after the Indian Stamp (Haryana Amendment) Act, 2018. The stamp is bought as e-stamp through the e-GRAS portal. Other states have their own rates, so we confirm the figure for your state before drafting. An insufficiently stamped deed is not admissible in evidence until duty and a penalty are paid.
How many partners can a partnership have?
A maximum of 50, under Section 464 of the Companies Act, 2013 and Rule 10 of the Companies (Miscellaneous) Rules, 2014. There must be at least two. If you expect more than this, or want to limit your personal liability, a Limited Liability Partnership or a company is the better form. We explain the trade-offs before you decide.
Can partners be paid salary and interest from the firm?
Yes, if the deed authorises it. For tax, interest on a partner’s capital is allowed up to 12% simple interest a year, and remuneration only to working partners within limits. Under the Income-tax Act, 2025 (Section 35(e)), remuneration is capped at the higher of ₹3,00,000 or 90% of book profit on the first ₹6,00,000, and 60% of the balance. We draft these clauses to fit.
What happens when a partner retires or a new one joins?
The deed should say how. Under Section 32 of the Partnership Act, a partner can retire with everyone’s consent, as the deed provides, or by notice in a partnership at will. A retired partner stays liable to outsiders until public notice is given. A supplementary deed records the change, and the Registrar of Firms and the GST portal are updated. We do the filings.
What clauses should a partnership deed contain?
At minimum: firm name, business, address, each partner’s capital, profit and loss ratio, interest, remuneration, bank signing authority, how decisions are made, admission and retirement, dissolution, settlement of accounts and dispute resolution. Add a clause for the death of a partner. We use a checklist so nothing important is left to the default rules.
Can a partnership deed be changed later?
Yes, with everyone’s agreement, through a supplementary or fresh deed on fresh stamp paper. Common changes are a new partner, a changed profit ratio and a new business address. The firm’s PAN, bank and GST records need updating afterwards. Keep one signed copy of every version. We prepare the change and update the records.
Can Taxhint draft the deed and register the firm?
Yes. We draft the deed for the partners’ review, arrange e-stamping and signing, apply for PAN, apply for the firm’s registration and help with GST and a bank account. If a dispute between partners is already in court, a practising advocate takes that part; we coordinate. You get one team from drafting to first bank account.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Government cost is the stamp duty on the deed. In Haryana the instrument of partnership attracts ₹1,000 and dissolution ₹100 (Article 46), paid as e-stamp through the e-GRAS portal. Other states differ, so we confirm yours.
Ready to begin?
Tell us who the partners are and how you want to share capital and profit, and we will prepare the deed for your review.