A partnership deed is a written agreement that names the partners and sets out how the firm runs. For a bank, the Registrar of Firms and the income tax department to accept it, it needs at least these items: firm name, business, place, capital, profit shares, partner rights and duties, and exit terms. This guide covers each clause, then stamp paper, registration and signing in India. It is not legal advice, so have a lawyer or chartered accountant read your final draft.
What the law requires and what it only suggests
The Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The Act does not force you to write it down. NCERT's accounting textbook says an agreement can be oral or written, and that a written deed should follow the Stamp Act and preferably be registered with the Registrar of Firms.
The tax rule is stricter. Under Section 184 of the Income-tax Act, 1961, a firm is assessed as a firm only if the partnership is evidenced by an instrument and the individual shares of the partners are specified in it. The Income-tax Act, 2025 repeats the same test in Section 325. So a deed with no profit shares fails the tax test, even if everything else is perfect.
Clause by clause: what to write
Copy this table into your draft as a checklist. The second column is the minimum. A template you can start from has the India version of each clause already laid out.
| Clause | What to write | Watch out for |
|---|---|---|
| Name | Full firm name, for example "Rao and Mehta Traders" (example) | Avoid a name close to another firm's |
| Business | The business in one clear sentence, plus a power to add related lines by written consent | A vague object makes later disputes harder |
| Place | Principal place of business and any branches | The Registrar of the area where a place of business sits handles registration |
| Capital | Each partner's amount, cash or asset, and the date it is paid | Say how a partner's non-cash capital is valued |
| Profit and loss sharing | Each partner's share as a fixed percentage, for example 60:40 (example) | This is the item the tax test checks |
| Interest on capital | A yearly rate, paid only from profits | Say clearly whether interest is paid at all |
| Remuneration | Monthly or yearly amount for working partners, and how it is set | Without a clause, no pay is due |
| Duties | Who handles what, and which decisions need all partners | Fix a limit above which two signatures are needed |
| Banking | Who opens accounts and who may sign cheques and transfers | Add a joint-signature limit |
| Accounts | Financial year, books kept at the place of business, yearly statement | Give each partner a right to inspect |
| Admission and retirement | How a new partner joins, notice to retire, how a leaver's share is paid out | Name a valuation method |
| Dissolution | Events that end the firm and how assets are settled | Say who keeps the firm name |
| Arbitration | Disputes go to a named number of arbitrators, in a named city | Name the seat and the language |
Silent clauses matter because the Act's default rules apply only subject to contract between the partners: no pay for working in the business, equal profit shares, equal contribution to losses, and interest on capital payable only out of profits. Your deed replaces those defaults, so write the numbers you agreed.
Check the tax clauses with an accountant
Interest and remuneration to partners affect the firm's tax. Ask a chartered accountant to check your figures against the current Act before you sign.
How many partners can a firm have?
A firm needs at least two partners. The maximum is 50: NCERT states that Section 464 of the Companies Act, 2013 lets the Central Government set a cap of up to 100, and the Government has set it at 50. A larger group needs another legal form.
Is registration of a partnership deed compulsory?
No. The Act does not make registration compulsory, but skipping it has a cost. Section 69 says that no suit to enforce a right arising from a contract or conferred by the Act can be brought by a person suing as a partner against the firm or another partner unless the firm is registered and that person is shown in the Register of Firms.
Registration is done with the Registrar of Firms of your state. Section 58 asks for a signed statement with the firm name, principal place of business, other places of business, the date each partner joined, the partners' names and addresses, and the duration of the firm. Your deed should hold the same facts.
Partnership deed stamp paper value
Stamp duty is set by each state, so no single figure is right. The Punjab Department of Industries and Commerce lists a copy of the partnership deed on Rs 2,000 non-judicial stamp paper, attested by a notary among its documents for firm registration. That is one state's example. Check your own stamp office or Registrar before you buy paper.
Signing and witnesses
Follow this order:
- Fix every figure and name. Read it with all partners.
- Print on the correct stamp paper for your state, or complete the state's e-stamping process if it offers one.
- Each partner signs every page or the last page, as your lawyer advises.
- Add two witnesses with name, address and signature. Ask your Registrar and bank whether they require them.
- Get a notary to attest if your Registrar asks, as the Punjab checklist does.
- Keep a signed copy for each partner.
Can a partnership deed be signed electronically? Often yes, for the signatures, but check the stamp and registration steps first. A deed for an immovable property transfer is a different case: the IT Act's First Schedule excludes any contract for the sale or conveyance of immovable property or any interest in such property. If a partner brings land into the firm, sign that transfer on paper and ask a lawyer.
For the deed itself, signing a PDF online lets partners in different cities sign without a courier. DulySigned creates simple electronic signatures, not Aadhaar eSign or a DSC. Ask your bank and Registrar whether they accept it.
Common mistakes
- No profit shares written. The income tax department needs them. Fix: state each share as a percentage or fraction.
- Copying a deed from another firm. Old names and rates carry over. Fix: search the draft for the old firm's name and every figure.
- Silent clauses. The Act's defaults then apply, such as equal shares. Fix: write every term you agreed.
- Wrong stamp paper. The state's rules decide the value. Fix: ask the stamp office or Registrar before you print.
- Deed and registration form disagree. Names, dates or addresses differ. Fix: compare the deed with the Section 58 list above.
- Changing terms by email. Fix: record every change in a signed supplementary deed. The 2025 Act asks the firm to furnish a certified copy of the revised instrument with its return when partners or shares change.
FAQ
Is registration of a partnership deed compulsory in India?
No, but an unregistered firm and its partners are barred under Section 69 from suing to enforce contract rights. Register with your state's Registrar of Firms.
What is the stamp paper value for a partnership deed?
It depends on the state. Punjab's checklist shows Rs 2,000 as one example, and other states differ. Check with your state's stamp office.
Can a partnership deed be signed electronically?
The signatures often can be, but stamping, notarisation and registration follow your state's rules. Property transfers fall outside the IT Act. Ask a lawyer.
How many partners can a firm have?
At least two and at most 50 under the current rule.