Partnership deed between doctors: what it must cover The Indian Partnership Act, 1932 rules that apply when the deed is silent, firm registration, and presumptive tax for the firm.

A partnership deed between two doctors should set out the profit and loss share, each partner's capital and drawings, who decides on staff and spending, who owns the patient records and the clinic's name, how a partner leaves, and what happens on death or disability. 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", and where the deed says nothing, the Act's default rules apply. Registering the firm is optional but worth doing, because an unregistered firm loses the right to sue on its contracts.

What does the Act decide if the deed is silent?

Section 13 opens "Subject to contract between the partners", so each of these is a default the deed can change. The ones that matter most at a clinic:

Which clauses matter most for a clinic?

1. Parties and firm name: full names, council registration numbers, addresses, and the clinic name used on the signboard and bank account.
2. Capital and drawings: what each partner brings, how much each may draw every month, and how drawings are adjusted against the year's profit.
3. Profit and loss share: the ratio, any fixed amount for the partner who manages the clinic, and how a visiting consultant's fee is treated before the split.
4. Expenses: which costs are the firm's (rent, staff, consumables, software, waste disposal) and which are each partner's own (council renewal, CME, personal indemnity cover).
5. Duties and decisions: OPD sessions each partner covers, who hires and fires staff, spending above which both must sign, and the bank mandate.
6. Patient records: that OPD registers, prescriptions and electronic records belong to the firm, who may access them after a partner leaves, and how a departing partner's patients are informed. Records retention duties under your council's regulations and the clinical establishments law in your State apply to the clinic regardless of the deed.
7. Name and goodwill: whether the clinic name can be used by the remaining partner, and any value placed on goodwill on exit.
8. Retirement, death and disability: notice period, how the outgoing share is valued and paid out, and whether a legal heir becomes a partner or is paid out.
9. Non-compete: how far and how long, if at all. Restraints on a former partner are a legal question; have your lawyer draft this clause.
10. Disputes: a named arbitrator or mediation step before court.

On sharing fees, keep regulation 6.4.1 of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 in view. It bars a physician from being party to "division, transference, assignment, subordination, rebating, splitting or refunding of any fee for medical, surgical or other treatment" and from commission for referring patients. Two partners sharing the profit of their own practice is the ordinary partnership the 1932 Act describes; a clause that pays either partner a share for patients referred in from outside is a different thing. Take advice if the deed pays anyone per referral.

Should the firm be registered?

Registration is with the Registrar of Firms of the State, under section 58. The application states the firm name, the place or principal place of business, other places of business, "the date when each partner joined the firm", the partners' names in full and permanent addresses, and the duration of the firm, and it is signed by all partners or their specially authorised agents. The West Bengal Government's note says a firm "may be registered at any time" and that "It is optional for partners to get the firm registered and there are no penalties for non-registration". Some States have amended section 58: the Maharashtra text adds the nature of business, a true copy of the deed, and a one-year time limit from constitution of the firm.

The reason to register is section 69. Under section 69(1), no suit to enforce a right arising from a contract or conferred by the Act can be brought by a partner against the firm or other partners unless the firm is registered and the person suing is shown in the Register of Firms as a partner. Under section 69(2), no suit to enforce a right arising from a contract can be brought by the firm against a third party, such as a landlord or an equipment vendor, unless the firm is registered. Once the Registrar records the statement under section 59, the firm is registered.

The deed itself carries stamp duty under your State's stamp law, and some States ask for it to be registered or notarised before the firm is registered. Odisha, for example, lists stamp duty of ₹200 on the deed and Form No. 1 under its Partnership Rules, 1943. Check your own State's Registrar of Firms.

How is a doctors' partnership firm taxed?

A resident partnership firm that is not an LLP is a "specified assessee" under section 58(11)(b) of the Income-tax Act, 2025, so it can declare 50% of gross receipts as profit under section 58(2), Table Sl. No. 3, if receipts are up to ₹50 lakh, or up to ₹75 lakh when cash received is 5% or less. Section 58(4) then bars any further deduction against that income. Section 58(5) allows salary and interest to partners to be deducted, but only for serial number 2 of the table, which is goods carriages. We did not find a parallel allowance for a professional firm under serial number 3, so ask your CA how partner remuneration and interest are handled if the firm stays on the presumptive scheme.

The firm files a return every year whatever its income (section 263(1)(b)), and it is a "specified person" for TDS under section 402(37), so it deducts on rent above ₹50,000 a month and on consultant fees above the threshold. Our posts on TDS on clinic rent and choosing between a proprietorship, partnership or company cover both.