Partnership Deed Format and Essential Clauses: A Practical Checklist for Indian Firms

Last updated 26 September 2026

What should a partnership deed contain?

A partnership deed is the written agreement between the partners that sets out how the firm is run, and it typically covers the firm's name and address, the business, each partner's details, capital, profit and loss sharing, interest, remuneration, duties and powers, bank operation, admission and retirement, dissolution and dispute resolution. Section 4 of 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.

A partnership can technically exist without a written deed, and no law requires the deed to be registered. In practice, you want it in writing. Say Sanjay and Tanvi start an interior design studio in Hyderabad with ₹12 lakh of capital and a 60:40 profit split. Without a deed, a disagreement about who put in what, or who may withdraw money, is decided on memory and default rules of the Act. With a deed, it is decided by what they signed.

Your deed also drives tax. Partner remuneration and interest are deductible for the firm only if the deed authorises them, which is why the clause list below matters as much as the ratio.

What are the essential clauses in a partnership deed?

The essential clauses are the ones that settle money, authority and exit. Use the table as a checklist while you talk to your CA, and note that the exact wording is drafted around the terms you agree.

How much interest and remuneration can a partnership deed provide?

For tax deduction, interest on partners' capital is allowed up to 12% simple per annum, and working partners' remuneration is allowed within a formula, and both only if the deed authorises them. These limits are summarised as of September 2026 from secondary sources, so confirm them with your CA before you finalise the numbers.

Remuneration limit

Under section 40(b) of the Income-tax Act, 1961, which applies to FY 2025-26 (AY 2026-27), aggregate remuneration to working partners is deductible up to the higher of ₹3,00,000 or 90% of the first ₹6,00,000 of book profit, plus 60% of the balance book profit. In a loss year, ₹3,00,000 applies.

Interest limit

Interest on capital is deductible at a maximum of 12% simple interest per annum. Interest or remuneration above these limits is not deductible in the firm's hands.

Conditions in the deed

• The remuneration must be authorised by the deed and must not relate to a period before the deed.
• Only working partners qualify. A non-working partner's remuneration is not deductible.
• From FY 2026-27 the same rule sits in section 35(e) of the Income-tax Act, 2025, earlier section 40(b), with the same limits reported by our sources.

Also note that TDS at 10% under section 194T may apply on payments such as salary, remuneration, interest and commission to partners once the total in a financial year crosses ₹20,000. See the taxation and compliance guide for how these fit your yearly compliance.

Does a partnership deed have to be registered, stamped or notarised?

The deed must be stamped as your state requires, it is usually notarised in practice, and no law requires the deed itself to be registered. Registering the firm under Section 58 of the Indian Partnership Act, 1932 is a separate and optional step.

Stamp duty is a state subject. Some states charge a flat amount, and others charge a percentage of capital with caps, so the same deed can cost different amounts in different states. We do not quote a figure here because it changes by state. Your CA confirms the stamp duty for your state before you pay.

Some blogs say a deed "should" be registered to be enforceable. Treat that loosely. What matters for enforcing contracts against third parties is registration of the firm, which Section 69 of the Act ties to the right to sue. Read what happens if you do not register for the details.

What mistakes do partners make when drafting a deed?

The most common mistakes are silence on exit, no dispute clause, and assuming the deed limits liability to outsiders. A deed governs the partners' relations with each other; it does not change what creditors can do.

1. Assuming the deed limits liability. Under Section 25 of the Act every partner is liable jointly with the others and also severally for the firm's acts, and this is unlimited. A clause saying otherwise does not bind creditors. If you want a liability shield, look at an LLP.
2. No exit terms. If the deed does not say how a retiring partner's share is valued, that becomes a dispute.
3. Vague authority. Without spending and signing limits, any partner can bind the firm.
4. Remuneration outside the tax limits. Payments beyond the limits are paid, but not deductible.
5. Dating the deed late. Remuneration cannot be authorised for a period before the deed.

What does a simple partnership deed format look like?

A simple deed follows a fixed order: a heading, the parties, the recitals, and then numbered clauses ending with signatures and witnesses. Use it as a skeleton, not as a template to copy, because the clauses must fit your terms and your state.

1. Heading and date: "Partnership Deed" with the date and place of execution.
2. Parties: each partner's name, parent's or spouse's name, age and address.
3. Recital: a line saying the partners have agreed to carry on business together.
4. Numbered clauses: name, business, place, duration, capital, profit and loss ratio, interest, remuneration, duties, banking, accounts, admission and retirement, dissolution, disputes.
5. Signatures and witnesses: signed by all partners, on stamp paper, and usually notarised.

Firm names cannot include words such as Crown or Royal, or suggest government sanction, without the state government's written consent under Section 58. Check the name before you print the deed. The partner-count rules are also worth noting: a firm needs at least 2 partners and can have at most 50.

Can Shunya's CA draft your partnership deed?

Yes. On Shunya's structure page, a CA drafts your Partnership Deed with the correct stamp duty for your state, covering capital contribution and profit-sharing ratio, and files it with the Registrar of Firms. The professional fee is ₹1,999.

You share your partner details, business objects and the terms you have agreed. Tell the CA about any extras you want, such as remuneration, interest, exit or dispute terms, on the free callback. The fee does not include stamp duty, the Registrar of Firms fee or other government or third-party costs, which are billed separately.

• Request a callback on the registration page; a CA calls within the hour.
• Or pay the professional fee online and begin immediately.
• Call or WhatsApp +91 80809 18797.

If you are unsure a partnership is right, compare it with an LLP in partnership vs LLP vs private limited.

This article is for general information only. For your specific situation, consult a practicing CA.