India · Business · Free

Partnership Deed

Free partnership deed under the Indian Partnership Act, 1932: capital, profit sharing, remuneration, retirement, death, expulsion and dissolution.

A partnership deed is the written agreement between partners of a firm under the Indian Partnership Act, 1932. It records capital, profit sharing, duties and exit terms, and you will usually need it to register the firm, obtain a PAN and open a bank account.

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What to watch when you use this

  • Registering the firm with the Registrar of Firms is generally optional, but under Section 69 of the Indian Partnership Act, 1932 an unregistered firm and its partners face serious limits on suing to enforce contracts. Most firms register.
  • Partners of a firm have unlimited liability for the firm's debts. If that is a concern, consider a limited liability partnership under the Limited Liability Partnership Act, 2008.
  • If the deed is silent, the Act's default rules apply, including equal profit sharing and no salary for partners. Record your actual arrangement.
  • Income tax law allows a deduction for partners' remuneration and interest on capital only within limits and only if the deed authorises them. Check the current limits with your accountant.
  • Stamp duty on a partnership deed is set by each State. If a partner brings immovable property into the firm, take specific advice on stamp duty and documentation.

Stamping and registration. Stamp duty is a State subject, and an unstamped or insufficiently stamped instrument is generally inadmissible in evidence under Section 35 of the Indian Stamp Act, 1899 until the duty and penalty are paid. Registration requirements are separate and depend on the instrument and the State. Confirm both for your State before executing this document.

Template
DEED OF PARTNERSHIP

This Deed of Partnership is made on [DATE] at [CITY] between:

1. [PARTNER 1 NAME], son/daughter of [PARENT NAME], aged [AGE], residing at [ADDRESS], PAN [PAN] ("First Partner");
2. [PARTNER 2 NAME], son/daughter of [PARENT NAME], aged [AGE], residing at [ADDRESS], PAN [PAN] ("Second Partner");
[ADD FURTHER PARTNERS AS NEEDED]
(together the "Partners").

The Partners have agreed to carry on business in partnership on the following terms.

1. NAME AND BUSINESS
1.1 The business will be carried on under the name "[FIRM NAME]" ("Firm").
1.2 The business of the Firm will be [DESCRIBE BUSINESS], and any other lawful business the Partners agree in writing.

2. PLACE OF BUSINESS
The principal place of business is [ADDRESS]. The Partners may open branches elsewhere by mutual consent.

3. COMMENCEMENT AND DURATION
The partnership is deemed to have commenced on [DATE] and will be a partnership at will, subject to the provisions of this Deed on retirement, death and dissolution.

4. CAPITAL
4.1 The initial capital of the Firm is ₹[AMOUNT], contributed as set out in Schedule 1.
4.2 Further capital will be contributed as the Partners unanimously decide, in their profit-sharing ratio unless agreed otherwise.
4.3 Each Partner's capital account will be credited with interest at [RATE]% per annum, or the maximum rate allowed as a deduction under income tax law, whichever is lower. Interest is payable only if the Firm has profits.

5. PROFIT AND LOSS
Net profits and losses of the Firm, after providing for partners' remuneration and interest on capital, will be shared between the Partners in the ratio set out in Schedule 1.

6. REMUNERATION OF WORKING PARTNERS
6.1 The following Partners are working partners: [NAMES].
6.2 The working partners will be paid remuneration as decided by the Partners from time to time, within the limits allowed as a deduction under income tax law, in the ratio [RATIO].

7. DRAWINGS
Each Partner may draw up to ₹[AMOUNT] per month against that Partner's share of profit, to be adjusted at the end of the financial year.

8. BANK ACCOUNTS
The Firm's bank accounts will be operated by [any one Partner / any two Partners jointly]. Payments above ₹[AMOUNT] require the signature of [two Partners].

9. BOOKS AND ACCOUNTS
9.1 Proper books of account will be kept at the principal place of business, and every Partner may inspect and copy them at any time.
9.2 The accounting year will end on 31 March. Accounts will be prepared, and audited where required by law, within [NUMBER] months of the year end and signed by all Partners.

10. DUTIES OF PARTNERS
Each Partner will act in good faith, devote such time to the business as agreed in Schedule 1, account for any benefit derived from the Firm's business or property, and not carry on any business competing with the Firm while a Partner.

11. MATTERS REQUIRING CONSENT
No Partner will, without the written consent of [all / a majority of] the Partners:
(a) borrow or lend money on behalf of the Firm above ₹[AMOUNT];
(b) give any guarantee or stand surety on behalf of the Firm;
(c) buy, sell or mortgage immovable property of the Firm;
(d) transfer or charge that Partner's share in the Firm;
(e) admit a new partner; or
(f) settle any claim of the Firm above ₹[AMOUNT].

12. ADMISSION OF NEW PARTNERS
A new partner may be admitted only with the consent of all Partners, by signing a supplementary deed.

13. RETIREMENT
A Partner may retire by giving at least [NUMBER] months' written notice to the other Partners. The remaining Partners may continue the business under the Firm name.

14. DEATH OR INCAPACITY
The death or permanent incapacity of a Partner will not dissolve the Firm. The surviving Partners will continue the business and may, if all agree, admit a legal heir of the deceased Partner as a partner.

15. SETTLEMENT OF ACCOUNTS
15.1 A retiring Partner, or the legal heirs of a deceased Partner, will be paid the balance in that Partner's capital and current accounts, the share of profits up to the date of retirement or death, and the agreed share of goodwill valued as set out in Schedule 1.
15.2 The amount will be paid within [NUMBER] months, in [NUMBER] equal instalments, with interest at [RATE]% per annum on the unpaid balance.

16. EXPULSION
A Partner may be expelled by a majority of the other Partners, acting in good faith, only for fraud, wilful breach of this Deed or conviction for an offence involving moral turpitude, after giving the Partner written notice of the grounds and an opportunity to be heard.

17. RESTRICTION AFTER RETIREMENT
A retiring Partner will not, for [NUMBER] months after retirement and within [AREA], carry on a business similar to the Firm's. The Partners agree that this restriction is reasonable.

18. DISSOLUTION
The Firm may be dissolved by agreement of all Partners, or as provided by the Indian Partnership Act, 1932. On dissolution, assets will be realised, liabilities and Partners' advances paid, capital returned, and any surplus or deficit shared in the profit-sharing ratio.

19. ARBITRATION
Any dispute between the Partners, or between a Partner and the legal heirs of a Partner, will be referred to a sole arbitrator appointed by mutual agreement under the Arbitration and Conciliation Act, 1996, with the seat at [CITY].

20. REGISTRATION AND GENERAL
The Partners will apply for registration of the Firm with the Registrar of Firms for [STATE]. Matters not covered by this Deed are governed by the Indian Partnership Act, 1932. This Deed may be amended only by a supplementary deed signed by all Partners.

IN WITNESS WHEREOF the Partners have signed this Deed on the date first written above.

_______________________        _______________________
[PARTNER 1 NAME]               [PARTNER 2 NAME]

Witnesses:
1. Name: [NAME]  Address: [ADDRESS]  Signature: ____________
2. Name: [NAME]  Address: [ADDRESS]  Signature: ____________

SCHEDULE 1
Partner | Capital (₹) | Profit-sharing ratio | Time commitment
[PARTNER 1] | [AMOUNT] | [%] | [FULL-TIME / PART-TIME]
[PARTNER 2] | [AMOUNT] | [%] | [FULL-TIME / PART-TIME]
Goodwill valuation on retirement or death: [METHOD, FOR EXAMPLE AVERAGE PROFITS OF LAST THREE YEARS MULTIPLIED BY [NUMBER]]

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This free template is provided by ClauseAudit as general information, not legal advice, and using it does not create an advocate-client relationship. Replace every [BRACKETED] placeholder. Stamp duty and registration requirements vary by State and are your responsibility. Have the final document reviewed by a qualified advocate before use.

When to use this template

  • You are starting a business with one or more partners as a traditional partnership firm.
  • Your firm runs on an old or oral arrangement and the profit ratio or roles have changed.
  • A partner is joining, retiring or has died and you need a fresh or supplementary deed.
  • Your bank or tax adviser has asked for a deed that authorises partner remuneration and interest on capital.

How to fill it in

  1. Fill in each partner's full details, the firm name, business description and principal place of business.
  2. Complete Schedule 1 with capital, profit ratio, time commitment and the goodwill valuation method.
  3. Set the interest rate on capital, working partners' remuneration, drawings limit and bank signing rules.
  4. Pay stamp duty on the deed under your State's stamp law, by stamp paper or e-stamping, before signing.
  5. All partners sign every page before two witnesses. Notarisation is commonly done but is not a legal requirement for validity.
  6. Apply to the Registrar of Firms in your State with the prescribed form, fee and a copy of the deed.
  7. Use the deed and registration certificate to obtain a PAN for the firm and open its bank account.

Key clauses explained

Capital, interest and remuneration (clauses 4 to 6)
Income tax law allows these as deductions only if the deed authorises them. Precise wording directly affects the firm's tax bill.
Matters requiring consent (clause 11)
Each partner can usually bind the firm in its ordinary business. Listing decisions that need consent protects partners from one partner's borrowing or guarantees.
Settlement on retirement or death (clause 15)
A clear formula and payment timetable for an outgoing partner's share, including goodwill, prevents the most bitter partnership disputes.
Expulsion with good faith and hearing (clause 16)
The Indian Partnership Act, 1932 allows expulsion only in good faith under a power conferred by contract. A defined process makes expulsion lawful and harder to challenge.
Restriction after retirement (clause 17)
The Act permits a reasonable restriction on an outgoing partner within a specified period or local limits. Keep it narrow in time and area to stay enforceable.

Frequently asked questions

Is registration of a partnership firm compulsory?

Registration with the Registrar of Firms is generally not compulsory under the Indian Partnership Act, 1932, though you should check any State amendment. However, Section 69 of the Act restricts an unregistered firm, and its partners, from filing suits to enforce rights arising from contracts against third parties or against each other. Because of this, most firms register. Procedures and fees differ by State, and many States now accept online applications.

How much stamp duty is payable on a partnership deed?

Each State fixes the stamp duty on partnership deeds, often as a fixed amount or a sum linked to capital. Rates differ significantly between States such as Delhi, Haryana, Maharashtra and Karnataka. Check the current schedule under your State's stamp law before signing. Contribution of immovable property to the firm may have separate stamp and documentation consequences.

What if the deed does not say how profits are shared?

The Indian Partnership Act, 1932 then applies its default rules. Broadly, partners share profits and losses equally, are not entitled to a salary, and are not paid interest on capital unless agreed. If your partners contribute different capital or time, these defaults may not reflect the deal, so record the actual ratio and remuneration in the deed.

Can a partnership deed include a non-compete?

Section 27 of the Indian Contract Act, 1872 generally voids restraints of trade, but the Indian Partnership Act, 1932 contains specific exceptions. Partners can agree not to carry on competing business while they are partners, and a retiring partner can agree not to carry on a similar business within a specified period or local limits, if the restriction is reasonable.

Should we form a partnership firm or an LLP?

A partnership firm is cheaper and simpler to set up and run. Its main drawback is that partners have unlimited personal liability for the firm's debts. An LLP under the Limited Liability Partnership Act, 2008 limits each partner's liability, has its own legal identity and continues despite changes in partners, but involves annual filings with the Registrar of Companies.

Do we need a new deed when a partner leaves or joins?

Yes. A change in partners or profit ratio should be recorded in a supplementary or fresh deed signed by the continuing and incoming partners, and an outgoing partner should sign a retirement deed. If the firm is registered, notify the change to the Registrar of Firms as the Act and your State's rules provide, and consider a public notice of a partner's retirement so the outgoing partner is protected from later liabilities.

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This free template is general information about Indian law as at 2026-10-10, not legal advice, and using it does not create an advocate–client relationship. Replace every bracketed placeholder and have the final document reviewed by a qualified advocate before use.