Ever since the Government introduced the amendment in the Indian Stamp Act, 1899, (hereinafter called as Stamp Act) there is constant confusion among the professionals about the manner and rate in which stamp duty is to be paid.

In one of my write-up (, I have already discussed the various reasons for introducing the amendments in the Indian Stamp Act, 1899, the constitutional background and history of the Indian Stamp Act, 1899, charging section, payment of stamp duty in case of listed and public limited companies, etc, so I am not pondering on the same in this write-up.

In this write-up, I am going to discuss only on the various incidence of payment of stamp duty in the case of a private limited company having physical shares.

This write-up is broadly divided into three parts, incidence of the stamp duty in case of increase in  Authorized Capital, Issue of Share capital, and Transfer of shares.


Authorized capital is the maximum amount authorized by the Memorandum as the capital of the company, however, if the company wants to increase its authorized capital it can do so by altering its memorandum under Section 61 of the Companies Act, 2013 after passing Ordinary Resolution.

Once a company passes the Ordinary Resolution, the company needs to file e-Form SH-7 and attach documents such as a certified true copy of the resolution, altered Memorandum, etc, with the Registrar of Companies under section 64 of the Companies Act, 2013.

The e-Form SH-7 attracts two types of payments, one for the registration of the MoA under the Companies (Fee for filings with Registrar of Companies) Rules, 2014. Fees for the same will be as follows:

Nominal Share Capital Other than OPC and Small Company OPC and Small Company
Fixed For every 10,000 or part thereof Fixed For every 10,000 or part thereof
Up to 1,00,000 5000 NA 2000 NA
More than 1,00,000 up to 5,00,000 5,000+ 400 2000 NA
More than 5,00,000 up to 10,00,000 21,000+ 300 2000 NA
More than 10,00,000 up to 50,00,000 36,000+ 300 2000+ 200
More than 50,00,000 up to 1,00,00,000 1,56,000+ 100 NA NA
More than 1,00,00,000 2,06,000 75 NA NA

In case there is a delay in filing of e-Form SH-7 beyond the 30 days, additional fees will be charged in the following manner.

1. Delay in up to 6 months 2.5% for the period of delay

2. Delay is more than 6 months 3% for the delay beyond 6 months

The second payment will be of stamp duty on e-Form SH-7, which we are going to pay under the respective state stamp act. For example, in the case of Delhi, it is 0.15% of the amount of increase in authorized capital subject to a maximum of Rs. 25 Lakhs.


The company can increase its paid-up share capital by issuing further shares either in physical mode or through a depository system. In the case of a public limited company, listed or unlisted, it is mandatory to issue shares in the dematerialized form that is through the depository system. However, in the case of a private company, they don’t need to issue shares in dematerialized form only.

In this write-up, I am focusing only on stamp duty to be paid in case of shares issued other than through stock exchange mechanism or depository mechanism that is in physical mode by the private company.

As per the Indian Stamp Act, 1899 as amended by the Finance Act, 2019, Section 9B (a) is applicable. For reference, I am reproducing the Section 9B  (a) here:

(a) when any issue of securities are made by an issuer otherwise than through a stock exchange or depository, the stamp-duty on each such issue shall be payable by the issuer, at the place where its registered office is located, on the total market value of the securities so issued at the rate specified in Schedule I

Section 9B (a) is applicable on all the securities; however, this write-up concerned only about the shares.

Further, section 9B is applicable when shares are issued otherwise than through stock exchange or depository mechanism, that is shares are issued in physical mode, and only private company can issue shares in the physical mode, hence, we can deduce that section 9B (a) is applicable only in case of private companies having physical shares.

Stamp duty will be paid by the issuer at the place where the registered office of the company is situated.

Stamp Duty is payable on the Market Value of the securities. Clause 16(B) of Section 2 of the Indian Stamp Act, 1899, defines market value as:

(16B) Market value.–“market value”, in relation to an instrument through which–

(a) any security is traded in a stock exchange, means the price at which it is so traded;

(b) any security which is transferred through a depository but not traded in the stock exchange, means the price or the consideration mentioned in such instrument;

(c) any security is dealt otherwise than in the stock exchange or depository, means the price or consideration mentioned in such instrument:

In the case of a private company issuing shares in physical mode, sub-clause (c) of Clause 16B of Section 2 of the Act will be applicable. Hence, stamp duty will be payable on the consideration mention in such an instrument.

The instrument is defined under clause 14 of Section 2 of the Act as follows:

“Instrument” includes–

(a) every document, by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished, or recorded;

(b) a document, electronic or otherwise, created for a transaction in a stock exchange or depository by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded; and

(c) any other document mentioned in Schedule I,

but does not include such instruments as may be specified by the Government, by notification in the Official Gazette.

Definition of the instrument is inclusive and will include a variety of instruments other than those excluded by the Government notification.

As per section 3 of the Indian Stamp Act, 1899, we need to pay stamp duty on the instrument, and further, as per Section 4, parties to the contract have the liberty (with the few exceptions) to choose one document as the principal document if single transaction involving multiple documents.

The stamp duty shall be levied only on such principal document and all the other documents will be stamped with an amount equal to Re. 1 (one).

The stamp duty to be paid on the principal document shall be the highest of the stamp duty attracted by any of the documents in the single transaction. For example, if any single transaction involves three documents, Document A, Document B, and Document C attract stamp duty equal to Rs. 10, Rs. 15, and Rs. 20 respectively. The parties to the contract can choose any one of the documents as the principal document, for example, they choose Document B as the principal document, but, Stamp Duty shall be paid equal to Rs. 20 that is the highest of all.

Further, a new sub-section (3) has been inserted through the Finance Act, 2019 in Section 4 of the Indian Stamp Act, 1899. As per sub-section (3), in case of an issue, sale, and transfer of securities the principal document will be the instrument on which stamp duty is paid as per Section 9A and no stamp duty (nor of Re. 1) to be paid on any other documents associated with the same transaction.

However, nothing is provided for section 9B, and hence the company is in a position to choose any one of the documents as the principal document and pay stamp duty on the same.

The different state provides a different method of payment of stamp duty. For example, in the case of Delhi, stamp duty is paid online through Stockholding Corporation of India Limited.

In case of the issue of shares, the stamp duty to be paid at the rate of 0.005% at the market value of the shares issued. Market value is such value as mentioned in the letter of allotment.


The transfer of shares also attracts stamp duty. The transfer of shares is regulated by Section 56 of the Companies Act, 2013.

As per Section 56, the company will not register the transfer unless a proper instrument of transfer in SH-4, duly stamped, dated, and executed by or on behalf of the transferor and the transferee and specifying the name, address, and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee.

So any transfer is valid only once documents are stamped, amount of stamp duty to be paid as per Schedule I of the Indian Stamp Act, 1899. In the case of dematerialized shares the responsibilities of collecting stamp duty in case sale/transfer of shares are on the stock exchange, clearing corporation, and depository, as the case may be.

When the physical shares are transferred, stamp duty is paid in form of adhesive stamps affixed on SH-4.

The rate of the stamp duty in case of transfer of shares is further divided into two types delivery based and non-delivery based, in case of transfer of physical shares it is generally delivery based, and hence the rate of stamp duty will be 0.015%.

(Author can be reached at E-mail: [email protected], [email protected])

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June 2021