Update 01.02.2019- Key Changes in the Indian Stamp Act

Key changes

  • Definition of bonds will not include debentures;
  • Definition of debenture inserted which includes usance bills, commercial papers, certificate of deposits and other short terms instruments of original or initial maturity of one year or as provided by RBI.
    • Definition under Act, 2013 categorically excludes instruments covered under Chapter III-D of RBI Act, 1939.
  • Definition of instrument now includes a document, electronic or otherwise, created for 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;
  • Definition of security also includes usance bills, commercial papers, certificate of deposits and other short terms instruments of original or initial maturity of one year or as provided by RBI.
  • Section 9A & 9B provides for levy of stamp-duty on following types of transactions:
Nature of transaction Stamp duty to be collected by Stamp duty to be collected from When On
Sale of securities through a stock exchange Stock exchange or clearing corporation Buyer At the time of settlement of transactions Market value of such securities
Transfer of securities by a depository, otherwise than on the basis of any transaction on stock exchange Depository Transferor/ Seller At the time of transfer Consideration amount
Issue of securities Depository Issuer At the time of creation or any change in records of a depository.

 

 

Market value of securities specified in allotment list
Issue of securities otherwise than on stock exchange or depository Issuer On each issue total market value of the securities
Sale or transfer or reissue of securities for consideration is made otherwise than

through a stock exchange or depository

seller or transferor or issuer on each such sale or transfer or reissue Consideration specified in such instrument

 

  • Rate shall be as provided in Schedule I. Accordingly, amendments have been made in Section 29 of the Act providing the details of the person who shall pay the duty.
  • Market value has been defined as well as explained under proviso to Section 21 as under:
Nature of security Market Value will be
Security traded in a stock exchange Trading price
Security transferred by depository but not traded in the stock exchange Consideration mentioned in the instrument.
Security dealt otherwise than in the stock exchange or depository Consideration mentioned in the instrument
Options in any security Premium paid by buyer
Repo on corporate bonds Interest paid by the borrower
Swap Only first leg of cash flow

 

  • The stock exchange or the authorised clearing corporation and the depository shall submit to the Government details of the transactions in the manner to be prescribed in the rules.
    • Failure to submit or submission of false document or declaration will be punishable with fine of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less. [Section 62A (2)]
  • The amounts collected on behalf of State Government to be transferred to such State Government determined as under within 3 weeks of the end of each month:
Particulars State Government eligible to receive stamp duty
Where buyer is located in India Where the residence of buyer is located
Where buyer is located outside India Where the registered office of the trading member or broker of such buyer is located.

 

In case no such trading member or broker, where the registered office of participant is located.

Issue of securities by issuer otherwise than through a stock exchange or depository, Place where its registered office is located

 

  • Section 62A (1) provides fine payable in case of failure to collect duty or failure to transfer duty to the State Government within 15 days of expiry of the 3 weeks’ time specified above, which shall not be less than one lakh rupees, but which may extend up to one per cent. of the collection or transfer so defaulted.

Major changes in Schedule I

  • Duty on debentures (Article 27)
    • Central Government has the power to levy stamp duty on issue of debentures pursuant to Entry 91 of List I (Union List).
    • Article 27 has been amended to provide ad-valorem rate of duty on issue of debentures (0.005%) and on transfer and re-issue of debenture (0.0001%).
    • The exemption in case of issue of debentures by an incorporated company or body corporate in terms of a registered mortgage-deed stands omitted.
  • Duty on security other than debentures (Article 56A)
    • equity shares, preference shares, warrants.
    • Issue will be subject to stamp duty of 0.005%;
    • Transfer on delivery basis will be subject to 0.15%;
    • Transfer on non-delivery will be subject to 0.003%
    • Rate for derivatives also specified.
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