The provisions regarding levying, collection and payment of Stamp Duty are contained in The Indian Stamp Act 1899. Under the Stamp Act, certain documents need to be legitimised by paying applicable Stamp Duty on them. Stamp duty is a State subject and hence would vary from State to State.
❖ Instruments which are chargeable to stamp duty
Instrument includes every document by which any right or liability, is, or purported to be created, transferred, limited, extended, extinguished or recorded. Any instrument mentioned in Schedule I to Indian Stamp Act is chargeable to duty as prescribed in the Schedule. These include affidavit, lease, memorandum and articles of company, bill of exchange, bond, mortgage, conveyance, receipt, debenture, share, insurance policy, partnership deed, proxy, shares etc.
The payment of Stamp Duty can be made by adhesive stamps or impressed stamps. Instrument executed in India must be stamped before or at the time of execution. Instrument executed out of India can be stamped within three months after it is first received in India.
❖ Timeline for Issuing Share Certificates and Payment of Stamp Duty by Unlisted Companies
Aspects | Timeline/Requirement | Stamp Duty on Share Certificates |
Issuing of Share Certificate | ● Within 2 months from incorporation |
Must be completed within 30 days of issuance |
● Within 2 months from allotment | ||
● Within 1 month from receipt of instrument of transfer or intimation of transmission | ||
Stamp Duty on Issue of Shares in DEMAT Form | When shares are issued in DEMAT form, the stamp duty is collected by the depository (like NSDL or CDSL) on behalf of the state government. It means that when shares are transferred or new shares are issued the depository ensures that stamp duty is paid. Shares transferred between beneficial owners within the same depository (e.g., NSDL to NSDL or CDSL to CDSL) are generally exempt from stamp duty. | Shares transferred between beneficial owners within the same depository (e.g., NSDL to NSDL or CDSL to CDSL) are generally exempt from stamp duty. |
Stamp Duty on Transfer of Shares (in physical form) | Instrument of transfer must be delivered within 60 days from execution | Must be completed within 30 days of event |
❖ State-wise Payment of Stamp Duty
✔ Delhi: Stamp duty payments can be made through the online portal of Stock Holding Corporation of India Limited (SHCIL). This portal streamlines the process of paying stamp duty for the state.
✔ Maharashtra (Mumbai): In Maharashtra (Mumbai), the Maharashtra Government's GRAS portal (Government Receipt Accounting System) at https://gras.mahakosh.gov.in/echallan/ enables for payment of stamp duty. E-challans for payment of stamp duty can be made on this portal by individuals. The price of the postage should tally with the one prescribed by Schedule 1 of Maharashtra Stamp Act when it comes to stamps.
✔ Bangalore (Karnataka): Stamp duty in Bangalore can be paid by buying stamp paper or using franking in the sub-registrar's office. You can buy physical stamp papers from authorized vendors or opt for the franking process, where a franking machine at the sub-registrar's office is used to pay the stamp duty.
✔ Haryana/UP/Bihar/Others: Stamp duty can be paid using physical stamp papers, which can be purchased from authorized or licensed vendors. The amount of stamp duty is based on the transaction value. For current methods of stamp duty payment in Haryana, contact the respective government authorities or the Registrar's Office in the state.
Under the Companies Act, 2013 and the Indian Stamp Act, 1899, stamp duty applies to the issuance and transfer of shares. The rates of stamp duty differ from state to state in India.
❖ Rates of Stamp Duty
Following are the pre and post amendment rates of stamp duty on issue of share certificates and transfer of shares as per schedule I of the Stamp Duty Act, 1899 (“the Act”)
Sr. No. | Particulars | Pre-Amendment rates | Post-Amendment rates | Who is required to Pay |
1 | Issue of Share Certificate | Varies from state to state | 0.005% for all states | Issuer |
2 | Transfer of Shares in physical form | 0.25% | 0.015% | Transferor |
3 | Transfer of shares in Demat form | Nil (earlier it was exempt to duty) | 0.015% | Transferee |
*It is pertinent to note that shares issued or transferred by the Companies prior to effective date of this amendment i.e. 1st July, 2020 shall be subject to old rates of stamp duty.
❖ Penalty for non-payment of Stamp Duty
In case of non-payment of stamp duty or evasion of payment of stamp duty on the issue of share certificate and in case of allotment of share within the prescribed time limit of 30 days, then, the company shall be liable for heavy penalty under the Act, which may extend to 10 times of the duty.
❖ How we help you?
DUGAIN ADVISORS LLP offers comprehensive consultancy and assistance in the valuation and stamping of share certificates. We recommend consulting with our team of experts and referring to the Companies Act, 2013, and the Indian Stamp Act, 1899, for accurate and up-to-date information regarding share certificates and stamp duty payment in India.
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