Background:  As per Section 3 of Indian Stamps Act 1899, Every Share Certificate must bear the necessary stamp duty as per the Stamp Act of the respective State/ Union Territory from which Certificate is issued. The rates of stamp duty can be obtained with reference to relevant article of given State Act.

According to Companies Act, 2013,- “Every person whose name is entered as a member in the register of members shall be entitled to receive share certificate within two months after allotment (or within such other period as the conditions of issue shall provide).”

According to Indian Stamp Act, 1899, the Company shall pay the stamp duty within thirty days after the Issue of Share Certificate.

ADHESIVE STAMP ON SHARE CERTIFICATE

  • The Share certificate must bear stamp duty as per State Stamp act. Stamp duty can be paid by putting adhesive stamps and cancelling the same. In case of issue of large number of shares, stamp duty can be paid in lump sum and this fact should be mentioned on the share certificates.
  • In such cases, putting adhesive stamp on each share certificate is not necessary. Stamp duty is payable even if security is issued in dematerialized form.
  • Stamp duty is payable on issue price and not on the value of security.
  • Stamp duty on share certificate is State subject, but Stamp Duty on Debenture Certificate is a Union Subject.

Issue of Share Certificate from other State:

  • Stamp duty payable on share certificate is lower in some states than other. It is ‘higher in Maharashtra’ and probably ‘Lowest in Delhi’.
  • Some companies having registered office in Maharashtra ‘Issue’ shares from other state by holding Board Meeting in that State.
  • BUT Companies Act nowhere specifies that share Certificates must be ‘ Issued’ from “Registered Office only”. So now companies have to pay Duty on issue of Share Certificate as per State where Registered Office of company is situated.

Stamp Duty on Issue of Duplicate Share Certificate:

One issue is whether stamp duty is payable again when a duplicate or split share certificate is issued. Section 3(a) of Indian Stamp Act states that every instrument mentioned in the Schedule I of Indian Stamp Act which, not having been previously executed by any person, is executed in India; shall be chargeable with stamp duty of the amount indicated in Schedule I.

DELHI STAMP ACT

As per Delhi Stamp act, stamp duty shall be paid on “CERTIFICATE OR OTHER DOCUMENT evidence the right or title of the holder thereof, or any other person,   either to any shares, one thousand stock in or of any incorporated Co. or other body corporate or to become proprietor of shares, scrip or stock in or of any such Company or body.”

Rate of the said stamp duty in Delhi shall be “One rupee for every one thousand, or a part thereof, of the value of the shares, scrip or stock including the amount of PREMIUM”.

Penalty shall be 1 to 10 times depending upon the order being passed by department. However penalty can be lower than 1 time as decided by authority.

PROCEDURE FOR SUBMISSION OF STAMP DUTY IN DELHI:

A. First Company will Allot Shares.

B. Company will is issue Share Certificates within 60 days of Allotment of Shares.

C. PREPARE DOCUMENTS:

After issue of shares, Stamp duty shall be paid to the exchequer of government within 30 (Thirty) days from issue of Share Certificates. Following documents shall be prepared:

  1. Covering Letter (duly affixed Rs 10/- Court Fee Stamp).
  2. List of Existing directors.
  3. List of shareholders.
  4. Share Certificate
  5. List of Allottees
  6. Certified Copy of Form-2/ PAS-3/ INC-7 with Challan.
  7. Certified Copy of Memorandum & Article of Association.
  8. Certificate of previous stamp duty paid, if any.

D. SUBMISSION OF DOCUMENTS:

At the time of issue of shares, Stamp duty shall be paid to the exchequer of government within specified period. Above discussed documents shall be prepared & submitted to Revenue department Delhi online within 30 days of Issue of Share Certificates..

The Department of Revenue, Delhi has launched “On-line Stamp duty Payment on Issuance of Shares”. This facility is to be utilised by Companies towards Payment of Stamp Duty on issuance of New Shares. This facility implemented for the Jurisdiction of NCT Delhi only.

  • First Step company will create log in of the Company on http://www.shcilestamp.com/estamp_share_issuance.html
  • Companies after taking login will populate the relevant details of the New Shares issued against which stamp duty payment to be made.
  • Submit all the documents online on the portal.

Note: 

Certified that all the aforesaid mentioned documents attached are copy of original and true copy of records of Company and should be digitally signed by Company Director/Company secretary/Chartered accountant.

E. PREPARATION OF DUTY CHART:

  1. Duty Chart is prepared by the department nearly about 15 to 20 days after submission of documents.
  2. Duty Chart includes Name of the Company, Address of the Company, Face Value of Shares issued, Premium Charged on Shares, Date of Issue, etc.

F. PREPARATION OF CHALLAN:

  1. Challan has been issued by department in Triplicate on the basis of Duty Chart Made.
  2. The same Challan has to be paid at Specified Bank (List of Bank will be provide by Department) within 5-6 working days for smooth working of your file/case

G. PAYMENT OF CHALLAN:

After the preparation of Challan (in triplicate), you have to make payment of Challan (in triplicate) in Specified Banks within 5 – 6 Working Days, recommended.

H. DEPOSIT OF CHALLAN:

i.  After submission of challan, we have to deposit a copy of challan with the revenue department.

ii. After verification of challan (after 20 days of depositing of challan), department issue a certificate of Stamp duty paid (1 day to 100 days).

Face value of Share Capital(A) Premium Amount(B) Total Value of Share Capital(C = A+B) Stamp Duty to be paid (C*0.10%)
Rs. 1 Lac0Rs. 1 LacRs. 100
Rs. 1 Lac Rs. 9 LacRs. 10 LacRs. 1,000
Rs. 10 Lac 0Rs. 10 LacRs. 1,000
Rs. 10 Lac Rs. 90 LacRs. 1 CroreRs. 10,000
Rs. 1 Crore 0Rs. 1 CroreRs. 10,000
Rs. 1 Crore Rs. 99 CroreRs. 100 CroreRs. 10,00,000

STAMP DUTY NOT PAID WITHIN 30 DAYS OF ISSUE OF CERTIFICATE

The procedure is same as procedure for submission of Stamp Duty on time(as discussed in previous point) but the only difference is that we have to pay penalty i.e. 1 to 10 times depending upon the order being passed by department.

A notice is being sent by department to the Company if it fails to pay the Stamp duty within Time Limits.

FAQ’S

A.     Whether stamp duty will be paid on issue of share Certificate in dematerialized form.
 Yes it is mandatory to paid stamp duty on issue of share Certificate in dematerialized form.
B.     Value on which Stamp Duty payable on Share Certificates?
 As per Section 21 of Indian Stamp Act,

Stamp duty will be paid on the issue price not on the face value. (e.g. in case of issue of security at premium, the stamp duty is payable on the issue price and not on face value of security.)

C.     Place from where Share Certificate can be issued by the companies under Companies Act, 2013.
 Companies Act nowhere specifies that share certificate must be ‘Issued’ from registered office only.
D.    Jurisdiction over Share Certificate or Debenture Certificate?
 Stamp duty on Share certificate is State subject, But

Stamp duty on Debenture Certificate I Union subject.

E.       Whether stamp duty will be payable again when duplicate or split Share Certificate is issued.
F.       As per Regulation 25 of Schedule I of Indian Stamp Act, stamp duty payable on counterpart of duplicate of an instrument is maximum One Rupees. Hence stamp duty of “ONE RUPEES” should be sufficient.
G.      Is Stamp Duty payable on Transfer of Shares?
 There is No Stamp Duty payable on Transfer of Shares.
H.      If a Company having registered office in Delhi & had Board meeting outside Delhi regarding Issue of Share Certificates, then what is the applicability?
 Legally & technically Speaking, Stamp Duty should be applicable as per the law of that state & No duty is payable under Delhi stamp Act. However this view is not currently accepted by department. So if registered office in Delhi then no matter where Board Meeting will be held for issue of share certificate. Company has to pay stamp duty
I.        Is Stamp Duty applicable on premium also?
 Yes, Stamp duty is payable on Face Value including premium.
J.        What is the no. of visits for getting Stamping done with department?
 You have to visit min. 8 times if your case is of penalty i.e.

(a) Submission of documents.

(b) For taking date of Hearing.

(c) For Hearing of Your case.

(d) For taking challan.

(e) For Deposit of challan at Specified Banks.

(f) For submission of copy of Challan to department.

(g) For Verification of Challan.

(h) For taking Certificate of Stamping.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

Read Other Articles Written by CS Divesh Goyal

(Republished with amendments)

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