Retirement of the partners in the firm
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 June 2012
when the some partners are retired from the partnership firm ,how their account close ,when same name of the firm continues?
what are the procedure are to be followed?
plesea guide in detail.
any article o this subject assist me to understanfd the subject in deepth?
which are the legal aspect are require to be covered?
what are the procedure are to be followed?
plesea guide in detail.
any article o this subject assist me to understanfd the subject in deepth?
which are the legal aspect are require to be covered?
08 June 2012
Generally , a Deed of Retirement is prepared.
.
The Capital Account of the outgoing partner is cleared by paying the balance lying to his credit. If his capital account shows a debit balance, then the amount is received from him by the firm.
.
In case accounts are being maintained on Regular Basis, Share in Profit/Loss till he remains as partner , has also to be squared up through actual give and take of the amount involved.
.
.
The Capital Account of the outgoing partner is cleared by paying the balance lying to his credit. If his capital account shows a debit balance, then the amount is received from him by the firm.
.
In case accounts are being maintained on Regular Basis, Share in Profit/Loss till he remains as partner , has also to be squared up through actual give and take of the amount involved.
.
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 June 2012
what is the procedure about the fixed assets are liying in the firm?
retiring partners are claming in that shares?
if the fixed assets are purchased under morgage loan and laon is still continue ,how to determine the partners 's capital?
retiring partners are claming in that shares?
if the fixed assets are purchased under morgage loan and laon is still continue ,how to determine the partners 's capital?
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 June 2012
when some partners are retired ,is stamp duty valuation is required for the fixed assets on the name of the firm,if not required when some partners r retired then on which time stamp duty is r to pay by the firms?
21 July 2025
Great questions! Let me break down the process and legal aspects regarding retirement of partners in a partnership firm, especially when the firm name continues and fixed assets & mortgage loans are involved.
1. Closing the Account of Retiring Partners:
Preparation of Retirement Deed:
A formal Deed of Retirement is drafted and executed by all partners (including the retiring ones). It states the terms of retirement, settlement of accounts, etc.
Capital Account Settlement:
The retiring partner’s capital account balance is settled—if credit balance, firm pays him; if debit balance, partner pays firm.
Adjust share of profit/loss till the retirement date based on the agreed profit-sharing ratio.
Valuation of Assets & Liabilities:
Fixed assets are revalued as per the firm’s policy or agreement.
If assets were purchased with a mortgage loan (liability), then the net book value (asset value minus loan outstanding) is considered.
The retiring partner's share of capital is calculated based on net assets after adjusting for liabilities.
2. Regarding Fixed Assets and Mortgage Loan:
Fixed assets purchased under mortgage loan:
The liability (loan outstanding) continues with the firm after partner’s retirement.
The retiring partner’s share of capital includes his share of net assets (fixed assets less loan).
The loan is not personally the retiring partner’s liability unless specifically agreed.
How to determine partner’s capital:
Capital = (Revalued Fixed Assets + Other Assets) – (Outstanding Loan + Other Liabilities)
Each partner’s share is calculated according to their profit-sharing ratio or as per agreement.
3. Stamp Duty on Retirement:
Is stamp duty required on fixed assets during partner retirement?
Generally, no stamp duty is payable on retirement alone since the firm name and ownership of assets remain the same (no transfer of assets outside the firm).
Stamp duty is applicable if assets are transferred outside the firm or if the firm is dissolved.
When is stamp duty payable?
Stamp duty is payable on execution of new partnership deed reflecting the retirement.
If the deed involves transfer of interest to other partners or admission of new partners, stamp duty may apply on the deed itself (varies by state law).
4. Legal Aspects to be Covered:
Drafting Retirement Deed: Covering date, terms, capital settlement, liabilities, goodwill (if any), share in profits till retirement, indemnity clauses, etc.
Revised Partnership Deed: Reflecting the changed composition.
Notice to Registrar (if applicable): Some states require filing changes in partnership firm with Registrar of Firms.
Accounting Adjustments: Update books, revaluation reserve, profit-sharing ratio changes.
Tax Implications: Consider capital gains tax on asset revaluation or transfer of interest, if applicable.
Loan Agreements: Check mortgage loan covenants about changes in partnership.
5. Articles and Resources for Deeper Understanding:
You can check out detailed articles on websites like:
CAclubIndia (search “Retirement of partner in partnership firm”)
Institute of Chartered Accountants of India (ICAI) publications on partnership accounting
The Indian Partnership Act, 1932 (Sections 31, 32 deal with retirement)
Taxmann or professional accounting journals for case laws & rulings
1. Closing the Account of Retiring Partners:
Preparation of Retirement Deed:
A formal Deed of Retirement is drafted and executed by all partners (including the retiring ones). It states the terms of retirement, settlement of accounts, etc.
Capital Account Settlement:
The retiring partner’s capital account balance is settled—if credit balance, firm pays him; if debit balance, partner pays firm.
Adjust share of profit/loss till the retirement date based on the agreed profit-sharing ratio.
Valuation of Assets & Liabilities:
Fixed assets are revalued as per the firm’s policy or agreement.
If assets were purchased with a mortgage loan (liability), then the net book value (asset value minus loan outstanding) is considered.
The retiring partner's share of capital is calculated based on net assets after adjusting for liabilities.
2. Regarding Fixed Assets and Mortgage Loan:
Fixed assets purchased under mortgage loan:
The liability (loan outstanding) continues with the firm after partner’s retirement.
The retiring partner’s share of capital includes his share of net assets (fixed assets less loan).
The loan is not personally the retiring partner’s liability unless specifically agreed.
How to determine partner’s capital:
Capital = (Revalued Fixed Assets + Other Assets) – (Outstanding Loan + Other Liabilities)
Each partner’s share is calculated according to their profit-sharing ratio or as per agreement.
3. Stamp Duty on Retirement:
Is stamp duty required on fixed assets during partner retirement?
Generally, no stamp duty is payable on retirement alone since the firm name and ownership of assets remain the same (no transfer of assets outside the firm).
Stamp duty is applicable if assets are transferred outside the firm or if the firm is dissolved.
When is stamp duty payable?
Stamp duty is payable on execution of new partnership deed reflecting the retirement.
If the deed involves transfer of interest to other partners or admission of new partners, stamp duty may apply on the deed itself (varies by state law).
4. Legal Aspects to be Covered:
Drafting Retirement Deed: Covering date, terms, capital settlement, liabilities, goodwill (if any), share in profits till retirement, indemnity clauses, etc.
Revised Partnership Deed: Reflecting the changed composition.
Notice to Registrar (if applicable): Some states require filing changes in partnership firm with Registrar of Firms.
Accounting Adjustments: Update books, revaluation reserve, profit-sharing ratio changes.
Tax Implications: Consider capital gains tax on asset revaluation or transfer of interest, if applicable.
Loan Agreements: Check mortgage loan covenants about changes in partnership.
5. Articles and Resources for Deeper Understanding:
You can check out detailed articles on websites like:
CAclubIndia (search “Retirement of partner in partnership firm”)
Institute of Chartered Accountants of India (ICAI) publications on partnership accounting
The Indian Partnership Act, 1932 (Sections 31, 32 deal with retirement)
Taxmann or professional accounting journals for case laws & rulings
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Section 270A penalty
- GST Registration Application -Rejected
- GSTR 9C- Table 9
- International transfer pricing- -> father entity vs son entity ->WHERE NO mutual say in management
- Tax liability on gift amount given to blood relation
- To Whom the Professional Invoice should be Raise
- Gst registration rule 14A
- Reimbursement of expense- GST applicable or not
- Query on solved queries
- When was the effective CA partnership deed? Can I use old FRN until new FRN alloted by ICAI?
- PLACE OF SUPPLY FOR COMMISSION AGENT
- Transport service POS
- E INVOICE, E-WAY, INVOICE
- GST RATE ON CONSTRUCTION BRICKS ?
- E stamp paper purchase
- Problem in filing Returns for International workers in EPFO
- Clarification for reversal of IGST on transfer of duty-free imported goods from EOU to DTA unit
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
Trending Online Classes
-
Live Course on GSTR 9 & 9C for FY 24-25(Detailed discussions, FAQ, Case studies and Live demo of GSTR 9/9C on GST Portal)
Industry Expert16 November 2025
CAclubindia
