Stamp duty on Issuance of shares in Delhi – Latest Provisions

STAMP DUTY ON ISSUANCE OF SHARES (PHYSICAL /DEMAT FORM)

I would like to draw your kind attention to the amendments in the Indian Stamp Act, 1899 notified by the Finance Act, 2019 wherein uniform rates were introduced by Ministry of Finance (Department of Revenue) through its notification dated December 10, 2019 which has notified the Indian Stamp (Collection of stamp-duty through  Stock Exchanges, Clearing Corporation and Depository) Rules 2019 to regulate the liability of the instruments of transaction in stock exchanges and depositories to duty. (Earlier effective date: 9th day of January, 2020). Further, the Central Government (Ministry of Finance) vide notification dated March 30, 2020 has deferred the effective date of amendments in Indian Stamp Act to 01^st day of July, 2020.

Prior to the Finance Act, 2019, there was no  stamp duty on the transfer of shares in demat.

Further, with respect to the issuance of shares, whether in demat or in physical form, the stamp duty was levied as per the rates notified by the respective state governments. Even in the case of demat, the duty was collected as per the rates notified by the state government and is collected as per the methods laid out by them.

Post effect – the Finance Act, 2019

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 was 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.

Under the Constitution of India, the legislative powers relating to stamp duty are divided between the Union and the States:

• Entry 91 (Union List) empowers Parliament to prescribe rates of stamp duty on specified financial instruments such as bills of exchange, cheques, insurance policies, transfers of shares, and debentures. Although rates are fixed by the Union, the duty is collected and retained by the States under Article 268.
• Entry 63 (State List) authorises State Governments to prescribe rates of stamp duty on all other instruments not covered by Entry 91, including property conveyances, leases, and mortgages. This power allows States to not only set varying rates but also enact state-specific stamp acts to govern such transactions within their jurisdiction.
• Entry 44 (Concurrent List) permits both Union and State Governments to legislate on matters other than rates, such as definitions, procedures, enforcement, and adjudication, with Union law prevailing in case of conflict

Recently (July, 2025), the Delhi State Government has issued a circular clarifying that stamp duty on the issuance of shares shall be levied as per article 19 of Schedule IA of the Indian Stamp Act, 1899, irrespective of the mode of issuance i.e., whether in demat or physical. In this Article, we have looked into the reasons behind the need of issuance of the circular and its impact.

LEGAL PROVISIONS OF STAMP DUTY ON SHARES:-

• Indian Stamp Act, 1899: Specifies the provisions of payment of stamp duty on instruments, including share certificates.
• Delhi Stamp Act & Notifications: Specifies that the applicable stamp duty rates for share certificates be 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.

REASON / PURPOSE OF THE AMENDMENT / CHALLENGES FACED

There was a longstanding area of confusion for Companies, professionals, and stakeholders. The amendments were aimed at facilitating the levy and administration of stamp duty on securities at one place, through one agency (Stock Exchanges or Clearing Corporations or Depositories), thereby resulting in ease of doing business.

As discussed hereinbefore that while the Central Government is empowered to levy stamp duty on the transfer of shares but the State Governments are empowered to levy stamp duty on the issuance of the shares. Post Amendments, the depositories, which are authorized to collect stamp duty on the issuance of shares in demat, started to collect such a duty as per the rates introduced by the Finance Act. The said action resulted in contradiction, as stamp duty on shares being issued in physical form was levied as per the rates notified by the state governments as in the state of Delhi, its levied as per Article 19 of Schedule 1A however, the depositories were charging rate as per the Finance Act.

Hence, on issuance of shares, two different rates were charged i.e.,

• one for physical and
• one for demat.

This inconsistency leads to the confusion amongst the professionals with respect to rates chargeable over the similar transactions.

This circular remove ambiguity, especially where depositories have collected stamp duty at 0.005% (the central rate). However, state prescribed rates prevails, and 0.1% is the applicable rate in NCT of Delhi—making adjudication and payment a statutory obligation.

KEY HIGHLIGHTS OF CIRCULAR DATED 29/07/2025

The circular issued by the Collector of Stamps, Delhi, provides the following key directions: –

1. Applicability: All listed and unlisted companies registered in the NCT of Delhi;

2. Quantum of Stamp Duty: Stamp duty at 0.1% of the value of shares issued;

3. Type of Issuance: Applicable on issuance of shares in physical or demat form.

4. Legal provision: The duty is payable under Article 19 of Schedule I-A of the Indian Stamp Act, 1899, read with Section 3 of the Act.

5. Jurisdictional Clarification: The circular reiterates that the Delhi Government has the authority to impose the stamp duty on such documents, pursuant to the constitutional framework discussed above.

6. Adjudication Requirement: All listed and unlisted companies located in Delhi must apply for adjudication of stamp duty before issuance, along with supporting documents as prescribed under the Act.

7. Compliance Deadline: Adjudication must be completed within the stipulated timeline and failure to do so may attract the legal penalties under the Indian Stamp Act.

Reference: Circular dated 29th July, 2025 issued by the Revenue Department, NCT of Delhi, vide No. F.10(166)/COS(HQ)/STAMP.BR/2025/93

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Author: CS Ravi Garg | Company Secretary & Compliance Officer | E-mail : csravi2014@gmail.com | Mob.: +91-7838 20 4665

Disclaimer: In no event shall the author be liable for any direct, indirect, special, or incidental damages resulting from or arising out of or in connection with the use of this information.