Indian Stamp Act, 1899 Amendments

The amended provisions of the Indian Stamp Act, 1899 brought through Finance Act, 2019 and Rules made thereunder shall come into force w.e.f 1st July, 2020. The changes are summarised as follows:

1. The amendments to the Stamp Act, 1899 deals with the duty levied upon the transactions carried out in the security market as the present collection of stamp duty on securities market has multiple rates for the same securities.

2. The Central Government through this act has created a mechanism which enables the state to collect stamp duty on securities market instruments at one place by one agency on one instrument through the Stock Exchanges or Clearing Corporations authorised by the Stock Exchange or by the Depositories. Before the commencement of this act the stamp duty was payable by both the buyer and the seller whereas after the amendment it is levied upon either of the two. (except in certain transactions where duty is payable by both the parties)

3. Part AA of Chapter II of the amended Stamp Act and the Rules made thereunder covers instruments specified in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956; a “derivative” as defined in clause (a) of Section 45U of the Reserve Bank of India Act, 1934; a certificate of deposit, commercial usance bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the Reserve Bank of India may specify from time to time; repo on corporate bonds; and any other instrument declared by the Central Government, by notification in the Official Gazette, to be securities for the purposes of this Act.

4. The stamp duty under this act on behalf of the State Government will be collected by the Stock Exchange or the Depositories which are authorised to do so. It has been notified by the Central Government that Clearing Corporation of India Limited and the Registrar to the issue or the Share Transfer Agent will act as the collection agents.

5. The collecting agent may deduct 0.2% of the stamp-duty collected on behalf of the State Government as facilitation charges before transferring it to the State Government.

6. In case of private placements/ e-IPOs through stock exchange platform, as per section 9A(1)(c), stamp duty shall be collected by the Depository on any creation or change in the records of a Depository, pursuant to issue of securities.

7. In case of bonus issue, which are issued without any consideration to existing shareholders, no stamp duty will be levied as according to Section 21 of the Amended Indian Stamp Act read with sub-section 16B of Section 2 states that stamp duty is to be collected on market value which is based on price or consideration involved.

8. Units of Mutual Fund Schemes are to be considered as securities for the purpose of applicability of stamp duty also. (Ref: SCRA & Stamp Act). The entire mutual fund is under the ambit of Section 9A of the Indian Stamp Act.

9. In case of Mutual funds Stamp duty is imposed on the value of units excluding other charges like service charge, AMC fee, GST etc. If the units are issued for Rs.1 crore then Rs.500 would be the stamp duty to be remitted to States.

10. Redemption of Mutual fund is not liable to duty as it is neither a transfer nor issue or sale.

11. Double incidence of stamp duty will be avoided by the current amendment, before being credited in the buyer’s demat account, the securities are transferred from the demat accounts of issuer to clearing corporation, the stamp duty shall be transferred to the State Government where the residence of the buyer is.

Stamp Duty Rates w.e.f. 1st July 2020

Name : Parth Khandhadiya