Chapter III - Relations of Partners to One Another
Section 13
Section 13: Partners’ mutual rights and liabilities
Section 13 supplies default rules for remuneration, profit and loss shares, interest and indemnities, subject to the partners' contract.
On this page
Need advice on Section 13?
This article is for general information. Refer to the Indian Partnership Act, 1932 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Subject to contract between the partners—
(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;
(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;
(c) where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits;
(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent. per annum;
(e) the firm shall indemnify a partner in respect of payments made and liabilities incurred by him—
(i) in the ordinary and proper conduct of the business, and
(ii) in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and
(f) a partner shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.
Central rule and applicability
The defaults include no remuneration for participating in the business and equal profit and loss sharing. Entitled interest on subscribed capital is payable only from profits. A business payment or advance beyond agreed capital attracts six per cent annual interest under the stated default. The section also provides firm indemnity for proper ordinary business and qualifying prudent emergency action, and partner indemnity for loss caused by wilful neglect.
Limits and related provisions
The opening subject-to-contract qualification matters. Capital interest and interest on an additional advance are distinct: the latter's six per cent rule must not be indiscriminately applied to all capital. Tax deductibility of remuneration or interest is a separate question under tax law. Review state amendments and the actual partnership agreement before using these defaults.
Hypothetical business example
Hypothetical: A partner contributes the agreed capital and later advances extra funds for inventory. The firm records the two amounts separately and checks the deed before applying the default interest rule to the additional business advance.
Practical decision flow
Read the deed's remuneration, profit-share, capital-interest and advance provisions before applying a default.
Separate subscribed capital from additional business payments or advances and establish the relevant records.
Match any indemnity claim to proper business conduct, qualifying emergency action or wilful neglect, and keep tax treatment separate.
Check the applicable state law
This guide explains the central Section 13 baseline. State amendments, notifications and rules can affect its application. Confirm the law applicable to the firm's location and the relevant partnership agreement before acting.
Practical checklist
Do
- Read the deed's remuneration, profit-share, capital-interest and advance provisions before applying a default.
- Separate subscribed capital from additional business payments or advances and establish the relevant records.
- Match any indemnity claim to proper business conduct, qualifying emergency action or wilful neglect, and keep tax treatment separate.
Avoid
- The opening subject-to-contract qualification matters. Capital interest and interest on an additional advance are distinct: the latter's six per cent rule must not be indiscriminately applied to all capital. Tax deductibility of remuneration or interest is a separate question under tax law. Review state amendments and the actual partnership agreement before using these defaults.
Glossary
- Subscribed capital
- The capital a partner has agreed to contribute.
- Indemnity
- Reimbursement for a qualifying payment, liability or loss under the stated conditions.
Frequently asked questions
Must every partner be paid a salary?
The central default gives no remuneration for taking part in the business, subject to the partners' contract.
Is six per cent the automatic rate on every capital contribution?
No. Clause (d) concerns business payments or advances beyond the capital agreed to be subscribed.
Does Section 13 settle income-tax deductions?
No. Contractual rights and the Partnership Act defaults are separate from tax deductibility.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026