Everyone has probably had some form of interaction with the concept of embedded finance while possibly not knowing what it is. This budding concept has its eyes set on massively changing the way business is done.
Today, convenience in trade and commerce is probably the most sought after by customers. The idea of having everything in one place at high speeds is what drives trade in this modern world. This is where embedded finance would come into play.
Embedded Finance (‘EmFi’) is a concept that typically allows non-financial entities to integrate financial services/ products into its own platform through the use of APIs (‘Application Programming Interface’) which is a software intermediary that allows two applications to talk to each other.
Put simply in the form of an example, let’s say you want to purchase a flight ticket. You reach the payment stage and see an option to purchase insurance as well, without having to leave the app you are currently using. This integration of an insurance purchase on a non-financial entities platform is just one small part of the bigger picture of embedded finance.
This article will focus on explaining the concept of embedded finance with specific focus on embedded lending.
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The table below provides the rate of stamp duty applicable on assignment of receivables in major states across India:
State
Stamp Duty
Andhra Pradesh
0.1% of the loan securitized or debt assigned with underlying securities subject to maximum limit of Rs.1 Lakh. [1]
Assam
8.25 percent.
Bihar
0.1% of the loan securitized or debt assigned with underlying securities subject to maximum limit of Rs.1 Lakh[2].
Chhattisgarh
0.1% of the loan securitized or with underlying securities subject to maximum limit of Rs.1 Lakh[3].
Delhi
one rupee for every one thousand rupees or part thereof, of the loan securitized or the debt assigned with underlying securities, subject to a maximum of Rs 1 lakh.[4]
Goa
8 percent.
Gujarat
Bombay Stamps Act, 1958 (as applicable to the state of Gujarat) , No. GHM – 98-221H.STP/1096/2527/H.1. In exercise of the powers conferred by Clause (a) of Section 9 of the Bombay Stamp Act. 1958 (Bom LX of 1958), the Government of Gujarat hereby reduces the duty with which an instrument of securitisation of Loans or the Assignment of Debt with underlying securities is chargeable under Article 20(a) of Schedule 1 to the said Act, to ten paise for every rupees 100 or part thereof of the loan securitised or debt assigned with underlying securities’ subject to a maximum of rupees 1 lakh[5].
Haryana
Approx. 12.5% for conveyance amounting to sale for immovable property and 6.25% for other conveyances.
Karnataka
Karnataka Stamp Act, 1957.The Government of Karnataka, Department of Stamps & Registration have specified that that with effect from 1st April 1999, ‘Deeds relating to assignment of receivables in the process of securitisation will be charged to a reduced duty of 0.1% subject to a maximum of Rs. One Lakh.’[6] Two rupees for every thousand rupees or part thereof subject to a maximum of rupees five lakhs, effective from 3rd February 2024.
Madhya Pradesh
Stamp duty of 7.5% of amount of debt assigned.
Maharashtra
Bombay Stamp Act, 1958. ‘Order dated 11th May 1994, No. STP. 1094/CR-369/(C)-M-1 – In exercise of the powers conferred by Clause (a) of Section 9 of the Bombay Stamp Act, 1958 (Bom. LX of 1958), the Government of Maharashtra hereby reduces with effect from 1st April 1994 the duty with which an instrument of securitisation of Loans or Assignment of Debt with underlying securities is chargeable under Clause (a) of Article 25 of Schedule 1 to the said Act, to ‘Fifty Paise’ for every rupees 500 or part thereof of the loan securitised or debt assigned with underlying securities subject to a maximum of Rs 1 lakh and in case of instrument of Assignment of Receivables in respect of use of credit cards to ‘Two Rupees and Fifty Paise for every rupees 500 or part thereof.’ subject to a maximum of Rs 1 lakh.[7]
Manipur
7 percent.
Meghalaya
upto Rs 50,000 – 4.6%, more than Rs 50,000 and upto Rs 90,000 – 6%, more than Rs 90,000 and upto Rs 1,50,000 – 8% , More than Rs 1,50,000 – 9.9%.
Nagaland
7.5 percent.
Odisha
0.1% of the amount or value of the consideration set forth in the said instrument.[8]
Punjab
3 percent.
Rajasthan
In exercise of the powers conferred by sub-section (1) of section 9 of the Rajasthan Stamp Act, 1998 (Act No. 14 of 1999) and in supersession of this department’s Notification No. F.4(4) FD/Tax/2015-230 dated March 9, 2015, the State Government, stamp duty chargeable on the instrument of debt assignment executed in respect of performing assets (standard assets) is charged at the rate of 0.15 percent of the amount of debt subject to maximum of rupees five lacs.[9]
Tamil Nadu
In exercise of the powers conferred by clause (a) of sub-section (1) of], the governor of Tamil Nadu hereby reduces the duty chargeable under the said act to ten paise for every Rs 100or part thereof the market value of the property which is the subject matter of conveyance, subject to the maximum of Rs 1 lakh, in respect of the instruments providing for transfer of non-performing assets or assignment of debt with or without underlying securities whether movable or immovable or intangible. in favour of reconstruction companies under SARFAESI act ,2002. the notifications appended to this order will be published in an extraordinary issue of Tamil Nadu government gazette dated 4-3-2005.
The stamp duty was reduced to 5% vide notification no. 297/XXVII (9)/2011/Stamp-61/2009 dated May 31, 2011 issued by the Department of Finance, State of Uttarakhand and is currently applicable. However, the said exemption is applicable only upto the value of the property being 25 lakhs. In the event the value exceeds 25 lakhs, then upto 25 lakhs, the stamp payable will be reduced by 25% i.e. 3.75% of market value will be payable, and above 25 lakhs, the stamp duty will be paid at 5% of market value.
[1] Notification G.O.Ms. No.305 dated 29.03.2004 issued by Registration and stamps Department, Government of Andhra Pradesh. This shall apply to ARC’s.
[2] Notification S.O.No.-1/M1-126-2004/2904 dated 29.12.2004 issued by Department of Registration, Government of Bihar. This shall apply to ARC’s.
[3] Notification No./F10-9-2004-C.T.-(R) –V-(32) dated 28.02.2004 issued by Financial and Planning Department {Commercial Tax (Registration) Department}, Government of Chhattisgarh.
[8] 1. Notification No. Stamp-6/05/35723/R. dated 31.08.2005 issued by Revenue Department, Government of Orrisa. 2. Notification No. Stamp-6/05/35723/R. dated 31.08.2005 issued by Revenue Department, Government of Orrisa.
[10] Notification No.K.N.5-1023/11-2005-500(137)-2003 dated 15.03.2005 as amended by No.K.N.5-1389/11-2005-500(137)/2003 dated 29.03.2005 issued by Kar Evam Nibandhan Anubhag-5, Government of Uttar Pradesh.
[11]Notification No.2307-F.T. dated 02.07.2004 issued by Finance (Revenue) Department, Government of West Bengal.
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