Transfer of partners own share/capital contribution to his son by appointment
This query is : Resolved
17 March 2025
A partner has 33% of shares in partnership firm and wants to transfer his total shares to his son, whether the transfer will be done just by admitting his son as new partner , or by way of gift and
whether stamp duty or tds applicable on above
whether stamp duty or tds applicable on above
12 August 2025
1. How to Transfer Partner’s Share to Son?
There are two common ways:
a) By admitting son as a new partner
The partner can transfer his entire share by retiring and admitting his son as a new partner.
This requires:
Dissolution of the outgoing partner’s share.
Admission of son via a new partnership deed or amendment.
Consent of other partners as per partnership agreement.
b) By way of gift / transfer of capital share
The partner can gift or transfer his capital share to his son.
This is more like assignment of the partnership interest.
Son can be admitted as partner on the basis of this assignment (with consent of other partners).
The firm’s deed and state laws will govern this transfer.
2. Is Stamp Duty Applicable?
Yes, generally stamp duty applies on the instrument of transfer or gift deed.
The rate and applicability depend on state Stamp Act where the firm is registered.
If transfer is by gift deed, stamp duty is payable as per Gift Stamp Act.
If by partnership deed amendment, stamp duty on deed varies state-wise.
It is advisable to consult local stamp office or a legal expert for exact stamp duty.
3. Is TDS Applicable?
TDS under Income Tax Act may apply on transfer of partnership interest under certain circumstances:
If transferor receives consideration (payment) for transfer, then TDS may apply under Section 194R (TDS on benefits or perquisites) or under capital gains provisions.
If transfer is by gift (no consideration), no TDS on transfer itself.
However, if partner receives capital gains on transfer of share (if it is treated as a capital asset transfer), TDS under Section 194-IA or others may apply if transaction meets threshold.
Typically, transfer of partnership interest to relative (son) by way of gift is not subject to TDS at the time of transfer.
4. Other Important Points:
The partnership deed may have restrictions on transfer of interest; partner must comply with deed terms.
Admission of son may require:
New partner agreement.
Update to registration with Registrar of Firms.
Tax implications of transfer (capital gains, gift tax) must be checked carefully.
There are two common ways:
a) By admitting son as a new partner
The partner can transfer his entire share by retiring and admitting his son as a new partner.
This requires:
Dissolution of the outgoing partner’s share.
Admission of son via a new partnership deed or amendment.
Consent of other partners as per partnership agreement.
b) By way of gift / transfer of capital share
The partner can gift or transfer his capital share to his son.
This is more like assignment of the partnership interest.
Son can be admitted as partner on the basis of this assignment (with consent of other partners).
The firm’s deed and state laws will govern this transfer.
2. Is Stamp Duty Applicable?
Yes, generally stamp duty applies on the instrument of transfer or gift deed.
The rate and applicability depend on state Stamp Act where the firm is registered.
If transfer is by gift deed, stamp duty is payable as per Gift Stamp Act.
If by partnership deed amendment, stamp duty on deed varies state-wise.
It is advisable to consult local stamp office or a legal expert for exact stamp duty.
3. Is TDS Applicable?
TDS under Income Tax Act may apply on transfer of partnership interest under certain circumstances:
If transferor receives consideration (payment) for transfer, then TDS may apply under Section 194R (TDS on benefits or perquisites) or under capital gains provisions.
If transfer is by gift (no consideration), no TDS on transfer itself.
However, if partner receives capital gains on transfer of share (if it is treated as a capital asset transfer), TDS under Section 194-IA or others may apply if transaction meets threshold.
Typically, transfer of partnership interest to relative (son) by way of gift is not subject to TDS at the time of transfer.
4. Other Important Points:
The partnership deed may have restrictions on transfer of interest; partner must comply with deed terms.
Admission of son may require:
New partner agreement.
Update to registration with Registrar of Firms.
Tax implications of transfer (capital gains, gift tax) must be checked carefully.
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