Business Contracts and Agreements

Business contracts are written agreements that set out what each party will do, what it will be paid, who bears which risk and how disputes will be settled. In India they are governed mainly by the Indian Contract Act, 1872, with stamp duty, registration, tax and sector rules layered on top. IMAK Advisory, an ICAI-registered CA firm in Bengaluru, works on business contracts for founders, small businesses and companies across India – shaping the commercial, financial and tax terms, checking compliance clauses, and working with advocates for legal drafting and opinions where they are needed.

Most contract problems surface months later: an agreement that was never stamped, a price that did not say whether GST was extra, an employment letter that should have been a consultancy contract, an ESOP grant that the accounts could not measure, or a supplier who never held the licence the contract assumed. This page explains how business contracts are made valid in India, the contracts most businesses need, stamp duty and e-signatures, tax clauses, and the compliance terms for supply, food and export contracts – including the quality standards marks, the Food Safety and Standards Act 2006, the Food Safety and Standards Rules 2011, IndAS 102 for ESOP agreements, the standard deduction for employment contracts and the tax position of NRIs who sign contracts in India.

• Founders' and shareholders' agreements, partnership deeds and LLP agreements
• Service, supply, distribution and franchise agreements
• Employment, consultancy and ESOP documents
• Leases, loan agreements and guarantees: financial and tax terms
• GST, TDS and withholding clauses for domestic and cross-border contracts
• Contract registers, renewals and related-party approvals

Under section 10 of the Indian Contract Act, an agreement is a contract if it is made by the consent of parties competent to contract, for a lawful consideration and a lawful object, and is not expressly declared void. Consent must be free – not caused by coercion, undue influence, fraud, misrepresentation or mistake. A contract with a minor is void, and agreements in restraint of trade are generally void, which is why broad non-compete clauses after employment ends are hard to enforce in India.

For business contracts, validity is only the starting point. A valid contract can still be useless if it does not say what happens when a payment is late, a delivery is short, a key person leaves or the law changes. The work is in the detail: scope, price, payment terms, taxes, warranties, liability caps, termination and dispute resolution.

Who Signs for a Company, LLP or Firm

A company signs through a director or an officer authorised by a board resolution; an LLP through a designated partner authorised under the LLP agreement; a partnership firm through a partner within the authority given by the deed. Before signing large business contracts, check the other side's authority – a board resolution or authority letter – and check that the entity exists and is active on the MCA or GST records.

Chartered accountants and advocates do different parts of the same job. We look at business contracts through the numbers: whether the price and payment terms work for cash flow, whether GST and TDS are dealt with correctly, how the contract will be accounted for, whether related-party or foreign exchange rules apply, and whether the compliance obligations each side takes on are realistic. Advocates look at enforceability, liability and the legal language, and they alone can give legal opinions and appear in disputes.

For standard business contracts, we prepare the commercial and financial terms and review the full draft, and where a contract needs legal drafting or a legal opinion we work with advocates you choose or we recommend. We tell you at the start which parts we handle and which an advocate should handle, so you are not paying twice or relying on the wrong person.

Stamp duty is a state tax on documents. The rate depends on the state and the type of document – an agreement, a lease, a deed of partnership, a guarantee or a share transfer – and is paid before or at the time of signing, usually by e-stamp paper or e-stamping. A document signed in one state and brought into another may need additional duty there.

In December 2023, a seven-judge bench of the Supreme Court held that an unstamped or insufficiently stamped agreement is not void; it is inadmissible in evidence until the duty and penalty are paid, and the defect can be cured. That ruling helps, but paying the correct duty at signing is still far cheaper than paying a penalty later when the contract is needed in a dispute.

• Check the stamp duty for the document type in the state of signing
• Use e-stamping where available and keep the certificate with the contract
• Register documents that require registration, such as leases for more than one year
• Register a partnership firm with the state Registrar of Firms to keep the right to sue on its contracts
• File the LLP agreement and changes with the Registrar in Form 3 within 30 days

Contracts formed electronically are valid under the Information Technology Act, 2000, and electronic signatures, including Aadhaar-based e-sign and digital signature certificates, are recognised. Most business contracts – services, supply, NDAs, employment letters – can be signed electronically. The Act does not apply to some documents, including negotiable instruments other than cheques, powers of attorney, trusts, wills and contracts for the sale or conveyance of immovable property, which still need physical execution. Stamp duty applies to electronic contracts too, so e-stamping should be done before signing.

Most disputes over money in business contracts are really disputes over tax. A clear contract answers these questions:

• Is the price inclusive or exclusive of GST, and who bears a change in the GST rate?
• Which GSTIN, address and place of supply will appear on invoices?
• Will TDS be deducted, at what rate category, and will the payer issue the certificate on time?
• For payments to non-residents, who bears withholding tax, and is a tax residency certificate needed for treaty rates?
• Is reimbursement of expenses part of the taxable value?
• When are invoices raised, and what happens if an e-invoice or e-way bill is wrong?
• For micro and small enterprise suppliers, is payment due within 45 days, as the MSMED Act requires?

These clauses decide cash flow and input tax credit, and they protect both sides when a tax officer asks questions years later.

Whether a person is an employee or a consultant is decided by the substance of the relationship, not only the title of the contract. The difference matters for tax. An employee receives salary, and TDS is deducted on salary; a consultant receives professional fees, on which TDS is deducted at the rate for professional services, and the consultant may need GST registration.

The standard deduction is available only on salary and pension income. Under the new tax regime, the standard deduction for salaried employees is ₹75,000; under the old regime it is ₹50,000. So the standard deduction in new tax regime calculations is one reason employees and consultants with the same payment end up with different take-home amounts. A consultant cannot claim the standard deduction, but can claim business expenses or use presumptive taxation where eligible.

What the Contract Should Say

• For employees: designation, salary structure, allowances, notice period, confidentiality and assignment of work created
• For consultants: scope, deliverables, fees, invoicing, GST, TDS, ownership of work and no employment relationship
• For both: data protection, conflict of interest and what happens on exit

If a contract is labelled consultancy but the person works fixed hours under your control with no other clients, the tax department or a labour authority may treat it as employment. We review the facts with you before you choose the form.

An ESOP plan and the grant letters under it are business contracts between the company and its employees. They must follow the Companies Act and its rules – including a minimum vesting period of one year, and limits on promoters and large shareholders, with relaxations for DPIIT-recognised startups – and they create an accounting cost even though no cash is paid.

For companies that follow Indian Accounting Standards, IndAS 102 (Ind AS 102, Share-based Payment) requires an equity-settled grant to be measured at its fair value on the grant date and recognised as an expense over the vesting period. Companies that follow the other accounting standards use the ICAI Guidance Note on accounting for share-based payments. Either way, the terms in the grant letter – vesting conditions, exercise price, exercise period, what happens on leaving – drive the accounting, so drafting and accounting should be done together.

For employees, the value of shares at exercise is taxed as a perquisite, with deferral available for employees of eligible startups. The grant letter should explain this plainly.

If you buy or sell products, the contract should say which certifications the goods must carry. In India, quality standards marks show that a product meets a notified standard. The common ones are:

Many products are covered by Quality Control Orders, which make BIS certification compulsory; such goods cannot be made, imported or sold without the mark. A supply contract should require the supplier to hold valid certification, give you the right to reject goods without the mark, make the supplier responsible for recalls and penalties caused by non-compliance, and require notice if a licence is suspended. Quality standards marks are also a common point in import contracts, because customs checks them at the port.

The Food Safety and Standards Act 2006 is the single law for food in India, administered by the Food Safety and Standards Authority of India (FSSAI). Every food business operator needs a registration or licence under it, depending on the type and scale of business. The Food Safety and Standards Rules 2011 set the procedural framework under the Act, including the qualifications and powers of food safety officers, food analysts, and the procedure for adjudication and appeals. Detailed product standards, labelling and licensing are in the regulations made under the Act.

In March 2026, the licensing and registration regulations were amended. Licences and registrations now stay valid unless suspended, cancelled or surrendered, and they are treated as suspended if the annual fee is not paid or the food safety compliance return is not filed on time. A food business cannot operate while suspended.

Clauses for Food Supply, Co-Packing and Distribution Contracts

• Which party holds the FSSAI licence for each activity: manufacturing, packing, storage, distribution, sale
• Labelling responsibility, including the licence number of the brand owner and manufacturer
• Compliance with the Food Safety and Standards Act 2006, the Food Safety and Standards Rules 2011 and the regulations, with a duty to notify any change in licence status
• Recall procedure, cost of recall and responsibility for penalties
• Testing at accredited laboratories and the right to audit
• Storage and transport conditions

For cloud kitchens, restaurants and food brands that outsource production, these clauses decide who is answerable when a sample fails. We check that the licence details in the contract match the FSSAI records before signing.

Business contracts with non-resident Indians – for rent, consulting fees, sale of property or shares, or loans – have extra tax and foreign exchange rules. Payments to non-residents usually carry TDS at the rates for non-residents, and remittances abroad need the bank's forms and, in many cases, a chartered accountant's certificate.

NRIs often ask: is income tax return filing mandatory for NRI landlords, consultants or investors? An NRI must file an income-tax return in India if the total income taxable in India is above the basic exemption limit, and should file to claim a refund of excess TDS or to carry forward losses. Some NRIs whose only Indian income is specified investment income with tax already deducted are not required to file. So the answer to "is income tax return filing mandatory for NRI" depends on the income and the tax deducted. The contract should provide for the TDS certificate, the NRI's PAN and tax residency certificate, and who bears any shortfall.

Loan agreements, sanction letters, guarantees and security documents are business contracts with a bank or lender on the other side. You rarely change the bank's standard terms, but you should understand them before signing: interest reset and benchmark, prepayment terms, covenants on financial ratios, personal guarantees by directors, cross-default clauses, and the security that will need to be registered as a charge with the Registrar of Companies.

People sometimes reach this page while looking for a particular bank's office, such as the Standard Chartered Bank Gurugram branch. IMAK Advisory is not connected with Standard Chartered Bank or any other bank; for the Standard Chartered Bank Gurugram branch, please contact the bank directly. What we can do is review a sanction letter or loan agreement from any lender for its financial and tax effects, and prepare the financial statements and projections the lender asks for.

Every business contract should say how disputes will be resolved: negotiation first, then mediation, arbitration or courts. Arbitration under the Arbitration and Conciliation Act, 1996 is common in commercial contracts; the clause should name the seat, the number of arbitrators and the language. For commercial disputes above the specified value that are not urgent, the Commercial Courts Act requires pre-institution mediation before filing a suit. A clear clause saves time; a vague one adds a dispute about the dispute. Advocates should finalise these clauses for significant contracts.

The way business contracts are worded decides how income and costs appear in the financial statements. Auditors, investors and tax officers read the contract to decide when revenue is earned and what liabilities exist, so the accounting should be considered before the contract is signed, not after.

• Revenue timing: a contract with milestones, acceptance tests or a right of return changes when revenue can be recognised
• Bundled deals: software with support, or equipment with installation, may need the price split between separate obligations
• Advance payments: money received before delivery is a liability, not income, and may still attract GST on receipt for services
• Warranties and service levels: penalties and warranty costs may need provisions in the accounts
• Leases: long leases can create a right-of-use asset and a lease liability for companies following Ind AS
• Variable pricing: volume discounts, rebates and price escalation affect the amount of revenue recorded
• Foreign currency: invoices in another currency create exchange gains or losses at each reporting date

Where a business follows Ind AS, revenue contracts are accounted for under the standard on revenue from contracts with customers, and share-based payment contracts under IndAS 102; other businesses follow the corresponding accounting standards and ICAI guidance. A short note from us on the accounting effect of a draft often leads to a better-worded clause – for example, a clear acceptance date, or a separate price for annual support – that avoids arguments with auditors later.

Contracts between a company and its directors, their relatives or related companies may need board or shareholder approval under section 188 of the Companies Act, unless they are in the ordinary course of business and at arm's length. They must also be disclosed in the financial statements and, for some transactions, in the board's report. For tax, payments to related parties can be examined for reasonableness, and cross-border related-party contracts fall under transfer pricing. We check these approvals and disclosures before signing.

• Keep a register of business contracts with parties, value, start and end dates, renewal and notice periods
• Diary price revision, renewal and termination notice dates
• Track obligations: deliveries, service levels, insurance, licences
• Match invoices and payments to contract terms every month
• Keep the stamped and signed copies, and the e-stamp certificates, in one place
• Review contracts when laws or tax rates change

For growing businesses, a simple contract register prevents most surprises. We set it up with your accounts team and review it at the year end with the audit.

1. Understand the deal: parties, scope, money flows and timeline
2. Identify the tax, accounting, foreign exchange and regulatory points
3. Prepare or review the commercial and financial terms
4. Coordinate with your advocate, or one we recommend, for legal drafting and opinions where needed
5. Check stamp duty, registration and signing authority
6. Review the final draft against the term sheet
7. Help with signing, e-stamping and filing where required
8. Add the contract to your register with key dates

We do not sign on your behalf, and the final decision on every term is yours.

We do not publish fees. The cost depends on the type and number of business contracts, whether we prepare terms or only review, the complexity of tax and foreign exchange points, and whether advocates are involved. Stamp duty and registration charges are paid at actuals. Our team shares the exact total after reviewing your requirements.

A Startup Granting Its First ESOPs

A software startup wanted to grant options to its first ten employees. The plan and grant letters were aligned with the Companies Act rules and the startup relaxations, the vesting schedule was linked to the accounting, a valuation was obtained for the grant date, and employees were given a plain note on when tax applies.

A Food Brand Using a Contract Manufacturer

A packaged snacks brand outsourced production. The contract was revised to state which party held which FSSAI licence, who was responsible for labelling and recalls, and how testing would be done. The brand checked the manufacturer's licence status before the first order and set a reminder for its annual compliance return.

A Consultant Moving to Employment

A long-term consultant was offered a full-time role. Comparing the two contracts showed the effect of TDS, GST and the standard deduction on take-home pay, and the employment contract was drafted with clear confidentiality and ownership of work terms.

• Signing without stamp duty or with the wrong amount
• Not stating whether the price includes GST
• Calling an employee a consultant to save tax
• Using a template from another country with clauses that do not work in India
• No clause on payment within 45 days for MSME suppliers
• Assuming a supplier holds a BIS or FSSAI licence without checking
• ESOP grant letters that do not match the plan or the accounts
• Not checking the authority of the person signing for the other side
• Signing a related-party contract without the required approval

Cross-Border Contracts

Contracts with foreign parties need FEMA compliance for payments and receipts, withholding tax planning, GST on import or export of services, and a clear governing law and dispute clause. Choose currency and payment terms with the bank's documentation in mind.

Government Contracts and Tenders

Government contracts usually follow the buyer's standard terms. Check eligibility, performance security, payment terms and the procurement preferences for MSMEs and startups before bidding.

Intellectual Property in Contracts

Contracts with designers, developers and agencies should assign the intellectual property they create to your business in writing. Trademark licences should be recorded where needed.

Buying or Selling a Business

Business transfer, share purchase and asset purchase agreements need due diligence, valuation and tax structuring before the legal documents are drafted.

• We are not advocates and do not give legal opinions or represent clients in court or arbitration
• We do not draft documents that hide the true nature of a transaction to avoid tax
• We do not backdate agreements or stamp papers
• We are not connected with any bank, including Standard Chartered Bank, and do not arrange loans
• We do not guarantee that a contract will be enforced in your favour

For a simple, low-value purchase on a supplier's standard terms, or a standard NDA used across your industry, you may not need a review. For a lease of a home office or a single consultancy job with a clear fee, a well-known template with correct stamp duty may be enough. We are most useful when money, tax, equity, foreign parties or regulated products are involved.

1. Who exactly are the parties, and who signs for each?
2. What is being delivered, by when, and how is it accepted?
3. What is the price, and does it include GST?
4. Will TDS or withholding tax apply?
5. What licences or quality standards marks must the goods or the other party hold?
6. What happens if either side wants to exit?
7. Which law applies, and how are disputes resolved?
8. Has the correct stamp duty been paid?

Contracts reveal prices, plans and relationships. As chartered accountants we follow ICAI's confidentiality rules. Your drafts and term sheets are used only for the work, shared only with the team and the advocates you approve, and stored securely.

• Parties and signing authority confirmed
• Scope, deliverables and acceptance defined
• Price, GST, TDS and payment terms clear
• Licences, quality standards marks and compliance duties stated
• Liability, indemnity and insurance agreed
• Termination and exit terms agreed
• Dispute resolution clause finalised
• Stamp duty paid and registration done if needed
• Contract added to the register with key dates

Our only office is in Whitefield, Bengaluru, where business owners can meet us in person. We work on business contracts for clients in any state; stamp duty and registration follow the law of the state where the document is signed or used, which we check for each contract. We do not have offices outside Bengaluru.

What makes business contracts legally valid in India?

Under the Indian Contract Act, 1872, an agreement between competent parties, with consent freely given, for a lawful object and lawful consideration, is a valid contract unless the law declares it void. Stamp duty and, for some documents, registration are also needed for the contract to be used as evidence.

Is an unstamped business agreement valid?

It is not void, but it cannot be used as evidence until the stamp duty and penalty are paid, as the Supreme Court confirmed in December 2023.

Can business contracts be signed electronically?

Yes, most can, using Aadhaar e-sign or a digital signature certificate under the Information Technology Act, 2000. Exceptions include powers of attorney, trusts, wills, negotiable instruments other than cheques and contracts for sale of immovable property.

Do chartered accountants draft business contracts?

We prepare and review the commercial, financial and tax terms of business contracts. Legal drafting, legal opinions and dispute representation are done by advocates, with whom we work where needed.

What is IndAS 102?

IndAS 102 (Ind AS 102, Share-based Payment) is the Indian Accounting Standard for ESOPs and other share-based payments. An equity-settled grant is measured at fair value on the grant date and expensed over the vesting period.

What are quality standards marks in India?

Quality standards marks show that a product meets a notified standard: the ISI mark and registration marks of BIS, the hallmark on jewellery, Agmark on agricultural produce, the FSSAI logo on packaged food and Ecomark. Many products need BIS certification under Quality Control Orders.

What is the Food Safety and Standards Act 2006?

The Food Safety and Standards Act 2006 is India's single food law, administered by FSSAI. Every food business operator needs a registration or licence under it, and food contracts should state which party holds which licence.

What do the Food Safety and Standards Rules 2011 cover?

The Food Safety and Standards Rules 2011 set the procedural framework under the Act, including food safety officers, food analysts, adjudication and appeals. Product standards, labelling and licensing are in separate regulations.

What is the standard deduction?

The standard deduction is a flat deduction from salary and pension income, available without proof of expenses. It is not available to consultants paid professional fees.

What is the standard deduction in new tax regime?

₹75,000 for salaried employees under the new tax regime, compared with ₹50,000 under the old regime.

Is income tax return filing mandatory for NRI?

An NRI must file if total income taxable in India is above the basic exemption limit, and should file to claim a TDS refund or carry forward losses. Some NRIs with only specified investment income, with tax deducted, need not file.

Is IMAK Advisory connected with Standard Chartered Bank Gurugram branch?

No. We are not connected with Standard Chartered Bank or any other bank. Please contact the Standard Chartered Bank Gurugram branch directly. We can review loan documents from any lender for their financial and tax effects.

Should a contract say whether GST is included?

Yes. The contract should state whether the price is inclusive or exclusive of GST, who bears a rate change, and the GSTIN and place of supply for invoices.

Do business contracts need to be registered?

Most do not. Leases for more than a year and documents transferring immovable property must be registered; partnership firms should be registered with the Registrar of Firms; LLP agreements are filed with the Registrar of Companies.

How long does a contract review take?

A standard contract usually takes two to four working days; a complex deal with negotiation takes longer.

How much does a contract review cost?

We do not publish fees. Stamp duty and registration charges are paid at actuals, and our team shares the exact total for our work after reviewing your requirements.

Partnership Deed and LLP Agreement · Startup Advisory · Trademark Registration · GST Registration and Returns · NRI Taxation · Due Diligence

Share the draft or term sheet, the names of the parties and the deadline for signing. Our team will list the financial, tax and compliance points and tell you which parts need an advocate.

Contact Details

Office Address

IMAK Advisory, ITPL Main Rd, Pattandur Agrahara, Whitefield, Bengaluru, Karnataka 560066, India

Phone

+91 79798 50684 (call or WhatsApp)

Email

imakadvisoryteam@gmail.com

Sources: Indian Contract Act, 1872; Indian Stamp Act, 1899 and state stamp laws; Supreme Court, In re Interplay between Arbitration Agreements and the Indian Stamp Act (December 2023); Information Technology Act, 2000; Ind AS 102; Food Safety and Standards Act, 2006 and Rules, 2011 (FSSAI); FSS licensing regulations amendment (March 2026, as reported by Mondaq); standard deduction as clarified by the government (Business Today, August 2025). Checked 2 November 2026.