In a bid to enhance transparency and prevent financial misconduct, the Government of India has directed that partnership firms must now disclose details of their beneficial owners in accordance with amendments to the Prevention of Money Laundering Act (PMLA) and allied compliance rules.

The Ministry of Finance, through a recent notification, has extended Know Your Customer (KYC) and beneficial ownership disclosure norms—previously applicable to companies and LLPs—to registered partnership firms. The move aims to strengthen oversight of ownership structures, particularly in sectors where such entities are used for investment routing, cross-border transactions, or high-value business operations.

Under the revised guidelines, any individual holding 10% or more interest in the firm—either through capital contribution or profit share—will be classified as a beneficial owner. Partnership firms are now required to maintain a register of such individuals and file disclosures with designated authorities, including during financial audits or government inspections.

The directive also brings partnership firms under closer scrutiny by financial institutions, which will now require declaration of beneficial owners before account openings, loan processing, or onboarding for digital services. This aligns with India’s broader commitments to the Financial Action Task Force (FATF) in curbing money laundering and terrorism financing.

Legal and compliance experts note that while the requirement will add to the documentation burden, it is a necessary step to build investor confidence and regulatory integrity. Firms that fail to comply may face penalties or limitations in accessing banking and government services.

The government has advised all partnership entities to review their ownership records, update their Partnership Deeds where necessary, and ensure timely disclosures through their compliance officers or authorized partners.

This measure represents a significant shift toward greater accountability and formalization in India’s business ecosystem, particularly within the vast and traditionally less-regulated domain of partnership firms.