Stamp Duty on Issuance of Share Certificate In Delhi (Physical/ Demat)

Stamp Duty on Issuance of Share Certificate In Delhi (Physical/ Demat) under Indian Stamp Act, 1899 along with Delhi Stamp Act and Notifications

Summary: Stamp duty on the issuance of share certificates in Delhi is governed by the Indian Stamp Act, 1899, the Delhi Stamp Act, and relevant notifications. The Finance Act, 2019, introduced uniform stamp duty rates effective from July 1, 2020, for dematerialized shares, while physical share certificates remain subject to state-specific duties. For physical share certificates, Delhi levies a 0.1% stamp duty on the face value or market value (whichever is higher). For dematerialized shares, the stamp duty is uniform across India at 0.005% of the total value. The collection of stamp duty is managed by the Stock Holding Corporation of India Limited (SHCIL) via its e-stamping portal.

The procedure involves issuing shares, computing stamp duty, registering on SHCIL, making the payment, and affixing the e-Stamp Certificate. Non-payment of stamp duty can result in penalties up to ten times the duty amount and make the document legally inadmissible. For dematerialized shares, stamp duty is collected centrally by depositories (NSDL, CDSL) and distributed to state governments. The company issuing shares pays the duty, while buyers bear the cost for share transfers. Compliance with stamp duty regulations ensures the legal validity of share certificates. Companies must follow the stipulated processes to avoid penalties and ensure seamless transactions.

♦ Legal Framework Governing Stamp Duty:

√ Indian Stamp Act, 1899: Governs the payment of stamp duty on instruments, including share certificates.

√ Delhi Stamp Act & Notifications: The applicable stamp duty rates for share certificates are determined by state-specific provisions.

√ Companies Act, 2013: Section 56 and Rule 5 of the Companies (Share Capital and Debentures) Rules, 2014 mandate issuing share certificates within 60 days of allotment.

√ Impact of Finance Act, 2019

LEGAL FRAMEWORK:

1. Indian Stamp Act, 1899 (Central Act)

• Governs the levy of stamp duty on various instruments, including share certificates.
• Amended in 2020 to introduce uniform stamp duty rates across India for Demat of Shares.

2. Amendment Effective from July 1, 2020

• The Finance Act, 2019, introduced changes to the Indian Stamp Act, which became effective from July 1, 2020.
• Stamp duty on share certificates is now uniform across all states (Demat Shares) at 005% of the total value of shares issued.
• Stamp duty on physical issuance of share certificate in delhi is 1% of the consideration value of shares.
• The duty is collected by the respective state governments, even though the rate is determined centrally.

3. State vs. Central Role:

• Central Government:

• • Defines and regulates stamp duty rates on the issuance of share certificates.
  • Ensures uniformity in stamp duty across all states.

• State Governments:

• • Responsible for the collection of stamp duty.
  • Manage e-stamping portals (such as SHCIL) for stamp duty payments.
  • Prescribe procedural aspects of stamp duty administration within their jurisdiction.

Thus, while the rate is fixed centrally, the collection and procedural implementation remain a state subject.

The Delhi Stamp Act, 2001 continues to govern stamp duty on physical share certificates, and there has been no revision in the applicable rate post July 2020

RATE OF STAMP DUTY:

The stamp duty on the issuance of physical share certificates in Delhi remains 0.1% of the face value or market value (whichever is higher). This means ₹1 per ₹1,000 of the share value.

PROCEDURE FOR SUBMISSION OF STAMP DUTY IN DELHI:

I. Allotment of Shares and filing of Form PAS-3.

II. Issuance of Share Certificates within 60 days of Allotment of Shares.

III. Preparation of Documents:

After issuance of share certificates, Stamp duty shall be paid to the government within 30 (Thirty) days from issue of Share Certificates. The following documents shall be prepared:

a) Covering Letter

b) List of Directors.

c) List of Shareholders.

d) List of Allottees

e) Copy of Original Share Certificate

f) Certified Copy of PAS-3 with Challan.

g) Certified Copy of Memorandum & Article of Association.

h) Authority letter in favour of Director / Professional.

IV. Calculation of Stamp Duty

Compute the stamp duty payable based on the face value and premium (if any) of the shares allotted.

V. Accessing the SHCIL Portal

The Government of Delhi facilitates the e-payment of stamp duty through the Stock Holding Corporation of India Limited (SHCIL) portal.

VI. Registration on SHCIL Portal

 Visit http://www.shcilestamp.com/estamp_share_issuance.html

• Register as a user if not already registered.
• Log in and select Delhi as the state.

VII. Entering Transaction Details

• Select Non-Judicial Stamp Duty Payment.
• Choose Share Certificates as the document type.
• Enter details such as company name, number of shares, and stamp duty amount.

VIII. Issue of Challan:

Challan has been issued by department online in the login id

IX. Payment of Stamp Duty

• Proceed to make the payment via net banking, debit card, or UPI on SHCIL site.
• After payment of challan. Receive the copy of Stamp paper of duty value from the office of SHCIL
• After successful receipt of challan, submit the copy of Challan on SHCIL website in log id.

X. Affixing Stamp Duty on Share Certificates

• Print the e-Stamp Certificate and attach it to the physical share certificates.
• The share certificates should then be signed by two directors or one director and the company secretary, as per the Companies Act, 2013.

Penalty for Non-Payment of Stamp Duty: Failure to pay stamp duty on share certificates may result in:

• Penalty up to ten times the stamp duty amount as per Section 62 of the Indian Stamp Act, 1899.
• The document being inadmissible as evidence in legal proceedings.

ARE DEMATERIALIZED SHARES SUBJECT TO STAMP DUTY?

Yes, after the amendment in July 2020, dematerialized shares are also subject to stamp duty on issuance of Share Certificate.

Key Changes After July 1, 2020:

1. Centralized Collection of Stamp Duty:

• Stamp duty on the issuance and transfer of securities, including dematerialized shares, is now collected by depositories (e.g., NSDL, CDSL) and distributed to the respective state governments.
• Earlier, stamp duty was levied only on physical share certificates at the state level.

2. Rate of Stamp Duty:

• For the issue of securities (including demat shares): 0.005% of the total market value.
• For the transfer of securities in demat form: 0.015% of the consideration value.

3. Who Pays the Stamp Duty?

• For the issuance of demat shares: The company issuing the shares must pay the stamp duty through the depository.
• For transfer of demat shares: The buyer pays the stamp duty, which is collected by the stock exchange or depository.

Conclusion:

Ensuring timely payment of stamp duty on share certificates is crucial for legal compliance. By following the above process and using the prescribed formats, companies can efficiently manage their stamp duty obligations in Delhi.

******

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).

Related Posts: 

Stamp Duty on Issue of Share Certificates

Stamp Duty on Shares issued under Indian Stamp Act in Demat Form

Latest Provisions on Payment of Stamp Duty On Shares

Stamp Duty on Transfer of Shares under Indian Stamp Act, 1899

Stamp duty on Issue and Transfer of Shares and Debentures

Stamp Duty on Transfer of Shares In Demat Form: Private Limited Company 

Stamp Duty on Shares And Debentures