Short answer: a partnership deed is the written agreement between two or more people who run a business together and share its profits. It should name the firm and the partners, state each partner’s capital and profit share, and say how salary, interest, banking and exit will work. It is signed by all partners on stamp paper as per your state’s law. Registering the firm with the Registrar of Firms is a separate, optional step, but an unregistered firm loses some rights to sue in court. This guide gives a sample format, the clauses that matter, the stamp duty position, the registration steps and the income tax limits that the deed must be written around.
This is general information, not legal or tax advice. Stamp duty and registration forms differ by state, so confirm the figures with your state’s stamp office or a local CA or lawyer before you sign.
The Indian Partnership Act, 1932 does not force you to have a written deed, because a partnership can exist by oral agreement. In practice you need one. The bank, the GST department, the income tax department and your lenders will all ask for it, and the income tax deduction for partner salary and interest depends on what the deed says. A firm needs at least two partners and can have up to 50.
This is a basic format for a two or three partner trading or service firm. Change the bracketed parts and add any terms you have agreed.
DEED OF PARTNERSHIP
This Deed of Partnership is made at [place] on [date] between:
1. [Name], son/daughter of [ ], aged [ ], residing at [ ], PAN [ ]
(First Partner)
2. [Name], son/daughter of [ ], aged [ ], residing at [ ], PAN [ ]
(Second Partner)
WHEREAS the parties have agreed to carry on business in partnership
and wish to record the terms of their agreement.
NOW THIS DEED WITNESSES AS FOLLOWS:
1. Name: The firm shall carry on business under the name and style
of M/s [firm name].
2. Place of business: The principal place of business shall be at
[address], or any other place the partners agree on.
3. Business: The firm shall carry on the business of [describe] and
any other business the partners agree on in writing.
4. Commencement and duration: The partnership starts on [date]
and shall continue [until dissolved as per this deed / for
[ ] years].
5. Capital: The partners shall contribute capital as follows:
First Partner Rs [ ] Second Partner Rs [ ]
Further capital shall be brought in as the partners agree.
6. Profit and loss: Profits and losses shall be shared in the
ratio [ ]:[ ].
7. Interest on capital: Simple interest at [ ]% per annum
(not more than the rate allowed under the Income-tax Act)
shall be paid on each partner's capital balance.
8. Remuneration: Working partners [names] shall be paid salary of
Rs [ ] per month / as per the formula allowed under the
Income-tax Act, for the time they give to the business.
9. Bank accounts: Accounts shall be opened in the firm's name and
operated by [jointly / either partner]. Payments above
Rs [ ] need both signatures.
10. Powers: No partner shall, without the consent of all, sell or
mortgage firm property, give guarantees, or borrow beyond
Rs [ ].
11. Books: Books shall be kept at the place of business, made up
to 31 March each year, and open to every partner.
12. Retirement and death: A partner may retire on [ ] days'
written notice. On retirement or death the firm shall
continue with the remaining partners (and legal heirs, if
agreed) and the outgoing partner's dues shall be paid
within [ ] months.
13. Dissolution: On dissolution, assets shall be applied first
to outside creditors, then to partners' loans, then to
capital, and any surplus shared in the profit ratio.
14. Arbitration: Disputes shall be referred to a sole arbitrator
under the Arbitration and Conciliation Act, 1996, at [place].
IN WITNESS WHEREOF the parties have signed this deed on the day
and year first written above.
1. ____________ 2. ____________
Witnesses:
1. Name, address, signature
2. Name, address, signatureA partnership deed is an “instrument of partnership” under each state’s stamp law, so the duty depends on the state and, in many states, on the capital. Many websites still quote older figures. These are the current positions we have checked for three states, as revised in 2024:
| State | Stamp duty on a partnership deed |
| Maharashtra | ₹500 where the contribution is up to ₹50,000; above that ₹500 for every ₹50,000 or part (about 1%), maximum ₹50,000 from 14 October 2024 (Article 47(1)) |
| Karnataka | ₹2,000 (rates revised from 3 February 2024) |
| Tamil Nadu | ₹1,000 (₹50 where capital does not exceed ₹500), from 3 May 2024 |
For any other state, check the stamp office or the e-stamping portal, since the amount can be a flat fee or a percentage of capital. If a partner brings land or a building into the firm as capital, several states charge that part like a conveyance on market value, which costs far more. Buy e-stamp paper through your state’s official channel or an authorised Stock Holding Corporation outlet, in the name of one of the partners. The same rules apply to later changes, which we cover in our guide to the supplementary partnership deed.
No law makes registration compulsory, and no penalty applies if you skip it. But Section 69 of the Indian Partnership Act takes away certain rights from an unregistered firm:
Outsiders can still sue an unregistered firm, so the disability runs only one way. Suits for dissolution of the firm and for accounts, and claims to realise the property of an insolvent partner, are not barred. Because a firm can be registered at any time, not just when it starts, some owners wait, but a dispute is the worst time to find out that you cannot go to court.
Registration with the Registrar is a different thing from registering for GST, Udyam or opening a bank account. After registration, any change in partners, name or address has to be notified to the Registrar. Giving false particulars in the statement is an offence under Section 70.
This is where badly drafted deeds cost money. A firm can deduct salary and interest paid to partners only if the deed authorises them, and only within limits (Section 40(b) of the 1961 Act, with the matching provision in the Income-tax Act, 2025):
For example, with book profit of ₹10,00,000 the maximum salary is 90% of ₹6,00,000 (₹5,40,000) plus 60% of ₹4,00,000 (₹2,40,000), which is ₹7,80,000. Only working partners can be paid salary, and the deed must name them and state the amount or the method. A partner’s share of profit is exempt in their own hands, but salary and interest are taxable as business income and interest. Since 1 April 2025, Section 194T also requires the firm to deduct TDS on salary, interest and similar payments to partners above ₹20,000 a year, so ask your CA how it applies to your deed. If you change the terms later, record it in a supplementary deed from the effective date, because a retrospective change cannot validate earlier payments.
Working alone instead? Our guide to setting up a proprietorship explains that route, and our small business guides collect the registrations and compliance steps in one place.
Is a partnership deed compulsory?
The law does not require a written deed, but banks, GST and the income tax department expect one, and the tax deductions depend on it.
Does the deed have to be notarised or registered with the sub-registrar?
The Partnership Act does not require it. Many firms notarise the deed anyway. Sub-registrar registration becomes necessary if the deed transfers immovable property. This is separate from registering the firm with the Registrar of Firms.
How many partners can a firm have?
At least two and at most 50.
Can a partnership firm be registered later?
Yes. Section 58 lets a firm apply at any time while the partnership continues, not only when it starts.
What if we do not fix a profit-sharing ratio?
The Act presumes that partners share profits equally, whatever each put in, so state the ratio clearly.
How is a partnership different from an LLP?
In a partnership, partners are personally liable for the firm’s debts without limit. An LLP is a separate legal entity with limited liability and is governed by the LLP Act, 2008, with its own agreement and stamp duty rules.
Sources: Indian Partnership Act, 1932, Sections 58, 59, 69 and 70 (India Code); Income-tax Act, 1961, Sections 40(b), 10(2A) and 194T, and the corresponding provisions of the Income-tax Act, 2025; Maharashtra Stamp Act, 1958, Article 47; Karnataka Stamp Act, 1957; Tamil Nadu stamp schedule as amended from 3 May 2024. Updated November 2026.