As per the general understanding of ours on the stamp act ‘it’s a state matter and every state will prescribe its rules and regulation to govern the same‘ for every instrument we have to look for the particular Stamp Act of the particular state.
Through this article we are trying to give you a broad idea about how to read stamp act as per your instrument requirement.
Let us start with the broad understanding of power to make laws relating to stamp duty as per constitution.
|“Article 246 read with Schedule VII of Constitution of India” gives the following powers to Union as well as state to make laws regarding Rates of stamp duty on various instruments|
|Schedule VII (LIST I) Entry 91 Union may make laws||Schedule V (LIST II) Entry 63 State may make laws|
|Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.||Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty.|
As you can see here, union may make law regarding rate of stamp duty only on certain prescribed instruments such as bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.
On the other hand, state has power to make laws on all other instruments which are not covered under Entry 91 of LIST I of Schedule VII.
Now you can understand that why there are different rates of stamp duties on sale deed, MOA, AOA, Gift Deed and on other instruments in different states and why there is similar rate of stamp duty on transfer of shares throughout the nation.
Now let us see the major Act which govern the matters regarding stamp duty in India. i.e., Indian Stamp Act, 1889. Now please try to understand this “Indian Stamp Act, 1889” is a Central legislation and what we learn so far is that centre has power to make laws only on certain rates of stamp duty. So why am I saying that it is a major act?
Indian Stamp Act, 1889 not only provides the rate of stamp duty but the whole framework of stamp duty relating matters such as definition of Instrument which are chargeable to stamp duty, how to pay stamp duty, different authorities under stamp act, different types of transactions including one or more instruments, penalties under stamp act and other pertinent matters regarding stamp duties.
Now think about it, is this act binding on whole nation? We just saw above that union has power to make laws only on certain instruments, so you can say in relation to those instruments which are mentioned under entry 91 of List I off Schedule VII this act is binding on whole nation. But what about those instruments which are not mentioned under entry 91 of List I off Schedule VII? is this act binding on those transactions also?
Now we will understand this with an example, suppose there is a person purchased a property worth 1cr from another person (both persons reside in Delhi and property is also situated in Delhi) and they executed a sale deed for this transaction. Now they want to pay stamp duty on such sale deed. So how will they pay stamp duty on it? There should be a legislation of state regarding stamp duty under which they are supposed to pay stamp duty. Now there are two options for state either make their own legislation regarding stamp duty matters and prescribe their stamp duty rates on that legislation or adopt the existing legislation of centre i.e., Indian Stamp Act, 1899 with or without modification and prescribed the stamp duty rates only.
The second approach is followed by Delhi. Delhi has not any stamp Act of their own but they have adopted the existing Indian Stamp Act, 1899 and they just introduced a Schedule 1A in the adopted act in which they prescribed the duties on various instruments which are not covered under entry 91 of List I off Schedule VII. So, in above example even in Delhi stamp duty related matters shall be govern by Indian Stamp Act, 1899 but the rate shall be taken from Schedule 1A of this act which provides the rate of stamp duty on Delhi on those instruments which are covered under entry 63 of List II of Schedule VII.
Now if you have made any transaction in Delhi relating to stamp duty on sale deed then just check “Indian Stamp Act, 1899” as adopted by Delhi as well as check schedule 1A (applicable only in Delhi) and if you want to transfer your share in Delhi then check “Indian Stamp Act, 1899”
The above approach is most popular approach through which states can regulate the matters regarding stamp duty. There is another kind of approaches also. Let us see what kind of approach Maharashtra follows regarding stamp duty relating matters.
Maharashtra has its own act for stamp duty matters i.e., The Maharashtra Stamp Act, 1958. Well interestingly it is almost same as Indian Stamp Act, 1899. So, what makes it different from Indian Stamp Act, 1899?
In “The Maharashtra Stamp Act, 1958” the definition of “instruments” does not cover the instruments which are mentioned under “entry 91 of List I off Schedule VII”, It means for the purpose of The Maharashtra Stamp Act, 1958 “bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts” these are not even instruments, which is quite logical because state has not any power to prescribe stamp duty on these instruments, so why consider them as instruments.
Now if you have made any transaction in Mumbai relating to stamp duty on sale deed then just check “The Maharashtra Stamp Act, 1958” and if you want to transfer your share in Mumbai then check “Indian Stamp Act, 1899”
I think now you can understand how the stamp duty framework works in India.
The article is written by Team Anupama Tripathi & Associates and solely for the purpose of education and comment, for more you can connect us # 8800839633 or [email protected]