Stamp duty on partnership deed

Among the many legal options available to entrepreneurs to start a business, is a partnership firm. To summarise the future working pattern and nature of the partnership, the partners in a firm must execute a partnership deed, which is a registered legal documents that clearly states the rights and obligations of each party involved in the partnership. As mentioned already, this deed must also be registered with the sub-registrar to have a legal validity and thus, be binding on all parties concerned. The parties will also have to pay a stamp duty, to get the partnership deed registered.

What is a partnership deed?

A partnership deed is an agreement between the partners of an enterprise that establishes the nature, character and the terms and conditions of a business partnership. It also specifies the terms pertaining to profit-sharing, salaries, liabilities of the partners, exit process, admission of new partners, etc. and thus, could be termed as the business blueprint.

According to Section 4 of the Partnership Act, 1932, a partnership deed is ‘an agreement between persons who have agreed to share profits of the business carried on by all or any one of them acting for all’.

While business partners can form joint ventures, without creating a written document, legally speaking, it is necessary to get a deed drafted, considering the complexities involved in business dealings.

See also: What is a tripartite agreement and how does it work?

Contents of the partnership deed

Even though the format of a partnership deed can vary, in the absence of any predetermined standard, the document should broadly cover the following details:

• Details of business.
• Duration of the partnership.
• Details of salaries and commission.
• Profit/loss sharing ratio among the partners.
• Monetary contribution by partners and interest on said capital to be paid to partners.
• Details of partners’ drawings.
• Rights and duties of partners.
• Policies for admission, retirement and exit of partners.
• Details of loans.
• Details of accounts.

Registration of partnership deed

Since there is no value attached to the partnership as such, the partners are required to pay only a nominal court fee and stamp duty for the registration of the partnership deed. Each partner has to submit an affidavit on a stamp paper of Rs 10, iterating their intention to enter into a partnership. On the application form, court fees stamp of Rs 3 must also be affixed.

Also read out in-depth article on stamp duty charges on real estate transactions.

Documents needed for partnership deed registration

Among the documents required to register a partnership deed are:

• Application form in the prescribed format.
• Partnership deed.
• Affidavit of acknowledgement of all the details mentioned and attested by notary.
• Office address proof.
• Identity proofs of the partners.
• Address proofs of the partners.
• Photographs of the partners.

Stamp duty on partnership deed

The stamp duty on partnership deeds has to be paid under Section 46 of the Indian Stamp Act, 1899. Even though stamp duty charges differ across states, the deed has to be notarised on a non-judicial stamp paper with a minimum value of Rs 200 or more. These charges need to be paid to the sub-registrar.

In Delhi, the minimum stamp duty payable on a partnership deed is Rs 200. The minimum stamp duty in Mumbai, payable on a partnership deed is Rs 500. In Bengaluru, Rs 500 must be paid as the stamp duty, if the capital of the firm exceeds Rs 500. In Kolkata, too, the deed has to be printed on a stamp paper of Rs 500.

Under Article 44 of Schedule I to the Gujarat Stamp Act, 1958, stamp duty on partnership deed is 1% of the partnership capital, subject to a maximum of Rs 10,000.

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