# Partnership Deed Drafting

> A partnership deed records the firm's name, business, capital contributions, profit-sharing ratio, partners' duties, and what happens on admission, retirement or death of a partner. For tax, it must authorise and quantify partners' salary and interest on capital — interest is deductible up to 12% a year and remuneration within Section 40(b) limits only if the deed provides for it. The deed is stamped and the firm can be registered with the state Registrar of Firms.

Practice: Legal Documents & Agreements — https://www.industax.com/services/legal-documents/

Unregistered firms can't sue third parties to enforce contracts under Section 69 of the Partnership Act, so registration is strongly advisable. Banks and GST also ask for the deed.

We draft deeds that work for tax as well as law: remuneration clauses that track the Section 40(b) limits, interest on capital, drawings, and exit mechanics. Changes are recorded through a supplementary or reconstitution deed.

## Key facts

| Item | Detail |
| --- | --- |
| Law | Indian Partnership Act 1932 |
| Interest on capital | Deductible up to 12% a year if authorised |
| Partner remuneration | Deductible within Section 40(b) limits if authorised |
| Registration | Registrar of Firms of the state (advisable) |
| Changes | Supplementary / reconstitution deed |

## Who needs this

- New partnership firms
- Firms admitting or retiring partners
- Firms whose deeds don't support tax claims

## What's included

- Deed drafting
- Tax-aligned remuneration and interest clauses
- Stamping guidance
- Registration with Registrar of Firms

## Documents

- Partners' KYC
- Firm name and address proof
- Capital and profit-sharing details

## Process

1. **Agree** — Terms between partners finalised.
2. **Draft** — Deed prepared and stamped.
3. **Register** — Filed with the Registrar of Firms.

## FAQs

### Is registering a partnership firm compulsory?

Not compulsory in most states, but an unregistered firm and its partners can't file suits to enforce contractual rights against third parties or each other, which makes registration important in practice.

### How much salary can partners take?

Any amount can be paid, but the firm can deduct remuneration to working partners only within Section 40(b): on the first ₹6 lakh of book profit, the higher of ₹3 lakh or 90% of book profit; on the balance, 60%. The deed must authorise it.

### Does a partnership deed need stamp duty?

Yes, as per the state's stamp act, usually based on the capital contributed. E-stamping is available in most states.

## Official sources

- India Code — central Acts: https://www.indiacode.nic.in/

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Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.