Brief: A physical transfer of shares for consideration requires a duly stamped transfer instrument, ordinarily Form SH-4. Since 1 July 2020, Section 9B(b) of the Indian Stamp Act, 1899 governs a transfer made otherwise than through a stock exchange or depository. The transferor pays duty on the consideration stated in the instrument at the Schedule I rate of 0.015%. The question of how that duty is paid must be distinguished from the rate: Delhi has an e-stamping system operated through Stock Holding Corporation of India Limited (SHCIL), while the Delhi stamp rules also recognise share transfer adhesive stamps. However, the availability of a particular stamp at a post-office counter, or an online document category specifically suitable for Form SH-4, should be confirmed before execution. A general e-stamp certificate or a payment intended for the issue of a share certificate should not automatically be assumed to discharge duty on a transfer instrument. The company should register a physical transfer only after receiving an instrument that is duly executed and stamped in the manner applicable to it.
Payment of Stamp Duty on Transfer of Shares in Delhi – Physical Transfer Stamps or the SHCIL Route?
1. The Practical Question
After preparing Form SH-4 for a physical transfer of shares, the transferor must determine the duty payable and obtain an acceptable means of stamping the instrument. In Delhi, the two possibilities commonly discussed are adhesive share transfer stamps and e-stamping through the SHCIL system. The rate can be identified from the central securities stamp-duty provisions. The precise payment facility and instrument category should be checked before money is paid.
This article concerns a transfer of existing shares for consideration otherwise than through a stock exchange or depository. The issue of new share certificates and a transfer effected within the depository system involve different charging or collection provisions. It also assumes that the shares can lawfully be transferred in physical form; the company should check any applicable dematerialisation requirement under Rule 9B before using Form SH-4.
2. Short Answer
For a physical share transfer for consideration, Section 9B(b) of the Indian Stamp Act, 1899 makes the duty payable by the seller or transferor on the consideration specified in the instrument. The applicable Schedule I rate for a transfer of securities other than debentures on a delivery basis is 0.015%.
Delhi’s stamp rules recognise adhesive stamps bearing the words “Share Transfer”, and Delhi operates an SHCIL e-stamping system. Those facts do not establish that every post office currently stocks the required stamps or that any general-purpose e-stamp certificate generated online can simply be attached to Form SH-4. Before execution, the parties should confirm with an authorised stamp vendor, SHCIL collection centre or the relevant Delhi stamp authority which payment process is currently available and accepted for a physical share transfer instrument.
3. Applicable Legal Provisions
- Section 9B(b), Indian Stamp Act, 1899: Where securities are sold or transferred for consideration otherwise than through a stock exchange or depository, duty is payable by the seller or transferor on the consideration specified in the instrument at the rate in Schedule I.
- Schedule I, Indian Stamp Act, 1899: Prescribes the rate applicable to the relevant class of securities transfer. For a delivery-based transfer of securities other than debentures, the rate is 0.015%.
- Sections 10 to 12, Indian Stamp Act, 1899: Address payment by stamps, use of adhesive stamps where permitted, and cancellation of adhesive stamps.
- Section 17, Indian Stamp Act, 1899: Generally requires an instrument executed in India and chargeable with duty to be stamped before or at the time of execution.
- Delhi Province Stamp Rules, 1934: Recognise a stamp bearing the words “Share Transfer” among the specified descriptions of stamps. The applicable rules and availability should be checked for the proposed instrument.
- Section 56, Companies Act, 2013, read with Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014: Requires a proper, duly stamped and executed instrument of transfer in Form SH-4 for registration of a physical transfer, subject to the provision’s other requirements.
Do not confuse issuance with transfer: Delhi communications concerning duty on a certificate or other document evidencing title to newly issued shares address a different transaction. The 0.1% issue discussed in that context should not be substituted for the 0.015% securities-transfer rate under Section 9B(b).
4. How Is the Duty Calculated?
For the transaction covered by Section 9B(b), the duty is calculated on the consideration amount specified in the transfer instrument. It is not calculated on the shares’ face value merely because the transfer is recorded on Form SH-4.
| Consideration stated in Form SH-4 | Rate | Calculated duty |
|---|---|---|
| ₹3,00,000 | 0.015% | ₹45 |
| ₹50,00,000 | 0.015% | ₹750 |
The workings are ₹3,00,000 × 0.00015 = ₹45 and ₹50,00,000 × 0.00015 = ₹750. The parties should ensure that the consideration and other particulars in Form SH-4 accurately reflect the transaction. A transfer without consideration requires a separate analysis; the examples above concern sales for consideration.
5. Physical Share Transfer Stamps
Delhi’s stamp rules recognise adhesive stamps specifically described as “Share Transfer”. Where the applicable rules permit their use and an authorised seller has the required denominations, the transferor may obtain the appropriate stamps, affix them to the transfer instrument and cancel them in accordance with Section 12 so that they cannot be used again.
The draft article identified the General Post Office at Gole Dak Khana, Gole Market, as a source. Current counter availability has not been verified and should not be stated as a guaranteed facility. Stock, denominations, authorised sale points and accepted payment methods can change. Before visiting a counter or executing the transfer instrument, confirm that genuine share transfer stamps of the required value are available from an authorised source.
The stamps should be affixed and cancelled at the appropriate stage of execution. Merely purchasing stamps, leaving them loose with Form SH-4, or attaching stamps that have not been properly cancelled may create a stamping defect.
6. The SHCIL E-Stamping Route
The Government of NCT of Delhi operates an e-stamping system through SHCIL and its authorised collection centres. An e-stamp certificate provides a traceable record of duty paid for the instrument and particulars entered in that system.
For a physical share transfer, however, the user must first confirm that the selected SHCIL facility provides the correct instrument category and procedure for transfer of securities on Form SH-4. A category for share certificates may concern the issue of shares rather than their subsequent transfer. Selecting it solely because the transaction involves shares could result in a payment record that does not correspond to the instrument being stamped.
The safe sequence is:
- Identify the transaction as a physical transfer of existing shares for consideration and calculate duty under Section 9B(b) and Schedule I.
- Confirm the appropriate Delhi instrument category and payment process with SHCIL or the competent stamp authority before paying.
- Enter the parties’, company’s and instrument’s particulars accurately in the approved process.
- Retain the issued certificate, payment record and any instructions establishing how the certificate is to be associated with Form SH-4.
- Check that the company receiving Form SH-4 accepts the completed stamping documentation for registration of the transfer.
Payment methods may depend on the particular SHCIL facility or authorised collection centre. Net banking, UPI, card payment or any other method should not be promised without checking the live facility applicable to this instrument.
7. Which Method Should Be Used?
| Issue | Adhesive share transfer stamps | SHCIL e-stamping |
|---|---|---|
| Availability | Confirm that an authorised seller currently stocks the required stamps and denominations. | Confirm that the facility offers the correct instrument category and process for Form SH-4. |
| Evidence of payment | Properly affixed and cancelled stamps on the instrument. | The e-stamp certificate and its verification and payment details, associated with the correct instrument. |
| Main practical check | Authenticity, adequate value and proper cancellation. | Correct classification, instrument particulars and acceptance of the certificate for the transfer. |
The parties should use the method that is available and legally appropriate for their particular Form SH-4. It is unsafe to treat a generic e-stamp payment as interchangeable with a share transfer stamp without confirming the instrument classification. Equally, there is no basis to say that e-stamping is compulsory for every physical share transfer in Delhi merely because the State operates an e-stamping system.
8. Timing and Company Registration
Section 17 of the Indian Stamp Act generally requires an instrument executed in India to be stamped before or at execution. Parties should therefore calculate the duty and establish the payment route before signing Form SH-4, rather than attempt to regularise stamping only when the company raises an objection.
Under Section 56 of the Companies Act, a company registering a physical transfer must receive a proper instrument of transfer that is duly stamped, dated and executed by or on behalf of the transferor and transferee, together with the relevant share certificate or letter of allotment, within the applicable statutory period. The company should examine the instrument and supporting evidence of payment before registering the transfer.
An instrument that is not duly stamped may face impounding and evidentiary consequences under the Indian Stamp Act. The exact duty, penalty and route for curing a defect depend on the facts and the law applicable when the issue is addressed. A later payment should not be assumed to make an originally defective execution compliant without that assessment.
9. Practical Checklist
- Confirm that the securities may be transferred in physical form and that Form SH-4 is the appropriate instrument.
- Distinguish a transfer of existing shares from an issue of new shares and from a depository transfer.
- State the actual consideration accurately and calculate duty at 0.015% for the covered delivery-based transfer.
- Before execution, confirm the currently accepted Delhi payment route for this instrument.
- If using adhesive stamps, obtain the correct stamps from an authorised source and cancel them properly.
- If using SHCIL, confirm the instrument category and retain the certificate and payment trail linked to the correct Form SH-4.
- Submit the duly executed and stamped instrument and supporting share certificate to the company within the applicable Section 56 period.
10. Conclusion
The duty on a physical share transfer for consideration otherwise than through a stock exchange or depository is governed by Section 9B(b) of the Indian Stamp Act. For the covered delivery-based transfer of shares, the rate is 0.015% of the consideration stated in the instrument, payable by the transferor.
Delhi’s rules recognise share transfer adhesive stamps, and the State has an SHCIL e-stamping system. The operational question is whether the chosen authorised outlet or electronic process currently supports stamping the particular share transfer instrument. Confirm that point before execution, use the correct category, and preserve evidence that the duty was paid on the Form SH-4 transaction.
11. FAQs
Q1. Is the stamp-duty rate on a physical sale of shares in Delhi 0.015% or 0.1%?
For the physical transfer of existing shares for consideration covered by Section 9B(b), the relevant Schedule I transfer rate is 0.015% of the consideration. Discussions of a 0.1% Delhi rate generally concern documents evidencing the issue of shares, which is a different transaction.
Q2. Can I definitely buy share transfer stamps at Gole Dak Khana?
The current availability of the required stamps at that counter has not been established. Confirm stock and denominations with an authorised seller before travelling or executing Form SH-4.
Q3. Can I select “share certificate” on SHCIL to pay duty on Form SH-4?
Do not assume so. A share certificate issued on allotment and an instrument transferring existing shares are different instruments. Confirm the correct category and procedure with SHCIL or the Delhi stamp authority before making payment.
Q4. Is SHCIL e-stamping compulsory for every physical transfer?
The existence of Delhi’s e-stamping facility does not, by itself, establish that it is the exclusive mode for every physical share transfer. Confirm the permitted mode for the instrument under the applicable Delhi rules and current administrative process.
Q5. Who is liable to pay the duty?
For a transfer for consideration under Section 9B(b), the Act places liability on the seller or transferor. The parties may arrange between themselves who ultimately bears the cost, but that arrangement does not change the statutory provision.
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Author: CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES, Company Secretary in Practice, Delhi. Email: [email protected]
