Finance Ministry to modernize the Indian Stamp Act
Archana Kejriwal | corplaw@vinodkothari.com
The Ministry of Finance, Government of India, through its Department of Revenue, has issued a draft Indian Stamp Bill, 2023[1] on 17th January, 2024 inviting public comments and suggestions within 30 days, with an intent to align it with the modern stamp duty regime. Once enacted, the Bill seeks to replace the Indian Stamp Act, 1899[2].
The Indian Stamp Act, 1899 is a fiscal legislation enacted for the purpose of generating revenue to the Government. Being enacted during the British era, the Act has undergone several amendments from time to time, however, most of the provisions still stand redundant, for instance, proviso under section 8(2) of the Act provides for the treatment of stamp duty on bonds, debentures or other securities issued by the local authority prior to 26th March, 1897, the Act at several places uses denomination of money in ‘anna’ which has no role in the present. Such transitional provisions hold no stand anymore, thus may be removed. Therefore, it has been proposed to modernise the legislation to enable it to deal with the present realities and objectives.
In this article, we have made an attempt to analyse the changes proposed.
Amendments proposed under the existing provisions
| Provisions under existing Stamp Act | Changes proposed | Our comments |
| (12) Executed and execution. — “executed” and execution” used with reference to instruments, mean “signed” and “signature” [and includes attribution of electronic record within the meaning of section 11 of the Information Technology Act, 2000 (21 of 2000);] | (17) “Executed” and “execution”, used with reference to instruments, mean “signed” and “signature” and includes attribution of electronic record within the meaning of section 11 and electronic signature within the meaning of clause (ta) of sub section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) | As per the provision of Indian Stamp Act, 2000 (ta) electronic signature means authentication of any electronic record by a subscriber by electronic means specified in the second schedule and includes digital signature. Although the concept of e-signature has been in practice for quite a long time, nothing has been mentioned in the Act regarding its applicability. The proposed change is one step ahead towards digitalisation. |
| (13) Impressed stamp. — “impressed stamp” includes— (a) labels affixed and impressed by the proper officer; and (b) stamps embossed or engraved on stamped paper; | (18) “Impressed stamp” includes- (a) labels affixed and impressed by the proper officer, and (b) stamps embossed or engraved on stamped paper; (c) electronic stamp or e-stamp; and (d) such other impressions as the State Government may specify. Explanation- Electronic stamp or e-stamp means an Electronically generated impression denoting the payment of stamp duty by electronic means or otherwise and includes digital/paperless e-stamp | As a part of modernisation, the number of paperless transactions has increased significantly. This Bill, a step ahead towards modernisation, includes e-stamp/paperless stamps under the definition of impressed stamp. |
| (16) Lease. — “lease” means a lease of immovable property, and includes also— (a) a patta; (b) a kabuliyat or other undertaking in writing, not being a counterpart of a lease, to cultivate, occupy, or pay or deliver rent for, immovable property; (c) any instrument by which tolls of any description are let; (d) any writing on an application for a lease intended to signify that the application is granted; | “Lease” means a lease of immovable property, and includes also- (a) a patta; (b) a kabuliyat or other undertaking in writing, not being a counterpart of a lease, to cultivate, occupy, or pay or deliver rent for, immovable property; (c) any instrument by which tolls of any description are let; (d) any writing on an application for a lease intended to signify that the application is granted; (e) any agreement to lease; (f) any mining licence or mining lease; (g) any leave and licence agreement; | The Bill seeks to widen the scope of definition of lease thereby including the following- i) any lease agreement, ii) any mining licence or mining lease, iii) any leave and licence agreement. |
| (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;] | (25) “market value”, in relation to an instrument through which- (a) any security which 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 which is dealt otherwise than in the stock exchange or depository, means the price or consideration mentioned in such instrument; (d) any right, title or interest in any estate or property is transferred to or vested in any other person, means the price of the property, which is the subject-matter of the instrument, that it would have fetched or would fetch if sold in open market on the date of execution of such instrument, determined in such manner and by such authority as may be prescribed by rules made under this Act or the consideration stated in the instrument, whichever is higher; (e) any mining lease is granted or renewed, means the value as may be provided by rules made by the State Government under the Act. | The 2023 Bill seeks to widen the scope of definition of “market value”. By this, the Bill clarifies the calculation of market value of certain transactions/ instruments. |
| 3. Instruments chargeable with duty.—Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefore respectively, that is to say— (a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in [India] on or after the first day of July, 1899; (b) every bill of exchange [payable otherwise than on demand] or promissory note drawn or made out of [India] on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in [India]; and (c) every instrument (other than a bill of exchange, or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of [India] on or after that day, relates to any property situate, or to any matter or thing done or to be done, in [India] and is received in [India]: Provided that no duty shall be chargeable in respect of— (1) any instrument executed by, or on behalf of, or in favour of, the Government incases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument; | (1) Subject to the provisions of this Act and the exemptions contained in Schedule I and Schedule II, the following instruments shall be chargeable with duty of the amount indicated in respective Schedule as the proper duty therefor, respectively, that is to say- (a) every instrument mentioned in the Schedules which, not having been previously executed by any person, is executed in India on or after the commencement of the Act; (b) every bill of exchange payable otherwise than on demand or promissory note drawn or made out of India on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in India; and (c) every instrument (other than a bill of exchange or promissory note) mentioned in the Schedules, which, not having been previously executed by any person, is executed out of India on or after that day relates to any property situate, or to any matter or thing done or to be done, in India and is received in India: PROVIDED that no duty shall be chargeable in respect of- (1) any instrument executed by, or on behalf of, or in favour of, the government in cases where, but for this exemption, the government would be liable to pay the duty chargeable in respect of such instrument; (2) any instrument executed, by, or, on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone. Explanation: For the purposes of this clause, the expressions “Developer”, “Special Economic Zone” and “Unit” shall have meanings respectively assigned to them in clauses (g), (za) and (zc) of section 2 of the Special Economic Zones Act, 2005. (2) The proper duty referred to in sub-section (1) on every instrument of grant or renewal of a mining lease, or through which any right, title or interest in any estate or property is transferred to or vested in any other person, where specified as a percent, shall be calculated as a per cent of the market value. | The Special Economic Zone (SEZ) Act, 2005 already provides exclusion of stamp duty on instruments relating to SEZ units. The second proviso under section (1) hereunder has been proposed to align the Act with the SEZ Act, 2005. After including the term mining lease under the definition of lease, stamp duty has been proposed to be levied on instruments relating to grant, renewal, transfer of such lease as a percentage of its market value. Under section 2(25), the Bill proposes that the market value of a mining lease shall be determined by the State Government. The Bill further uplifts the exemption of stamp duty on any instrument executed in relation to a ship or vessel registered under the Merchant Shipping Act 1894, the Indian Registration of Ships Act, 1841 or any other Act. |
| 4. Several instruments used in single transaction of sale, mortgage or settlement.— (1) Where, in the case of any sale, mortgage or settlement, several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with the duty prescribed in Schedule I, for the conveyance, mortgage or settlement, and each of the other instruments shall be chargeable with a duty of one rupee instead of the duty (if any) prescribed for it in that Schedule. (2) The parties may determine for themselves which of the instrument so employed shall, for the purposes of sub-section (1), be deemed to be the principal instrument: Provided that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instruments employed. (3) Notwithstanding anything contained in sub-sections (1) and (2), in the case of any issue, sale or transfer of securities, the instrument on which stamp-duty is chargeable under section 9A shall be the principal instrument for the purpose of this section and no stamp-duty shall be charged on any other instruments relating to any such transaction. | (1) Where, in the case of any sale, mortgage, gift, lease or settlement, several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with the duty prescribed in Schedules, for the conveyance, mortgage, gift, lease or settlement, and each of the other instruments shall be chargeable with a duty of one hundred rupees instead of the duty (if any) prescribed for it in the Schedules. (2) The parties may determine for themselves which of the instruments so employed shall, for the purposes of sub-section (1), be deemed to be the principal instrument: PROVIDED that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instruments employed. (3) Notwithstanding anything contained in sub-sections (1) and (2), in the case of any issue, sale or transfer of securities, the instrument on which stamp-duty is chargeable under section 17 shall be the principal instrument for the purpose of this section and no stamp-duty shall be charged on any other instruments relating to any such transaction. | Section 4 of 1899 Act states that for a number of documents forming part of a single transaction, the duty is payable only on the principal document and all other documents shall be chargeable with rupee one. The additional charge for every additional document is proposed to be increased to rupees 100. Also, the gift and lease documents are being proposed to be added to the list of principal documents. |
| Duties by whom payable.—In the absence of an agreement to the contrary, the expense of providing the proper stamp shall be borne — (a) in the case of any instrument described in any of the following Articles of Schedule I, namely:— No. 2. (Administration Bond), [No. 6 (Agreement relating to Deposit of Title-deeds, Pawn or Pledge),] No. 13 (Bill of exchange), No. 15 (Bond), No. 16 (Bottomry Bond), No. 26 (Customs Bond), No. 32 (Further charge), No. 34 (Indemnity-Bond), No. 40 (Mortgage-deed), No. 49 (Promissory-note), No. 55 (Release), No. 56 (Respondentia Bond), No. 57 (Security-bond or Mortgage-deed), No. 58 (Settlement), No. 62(c). (Transfer of any interest secured by a bond, mortgage-deed or policy of insurance),— by the person drawing, making or executing such instrument: [(b) in the case of a policy of insurance other than fire-insurance—by the person effecting the insurance; (bb) in the case of a policy of fire-insurance— by the person issuing the policy;] (c) in the case of a conveyance (including re-conveyance of mortgaged property) by the grantee: in the case of a lease or agreement to lease—by the lessee or intended lessee: (d) in the case of a counterpart of a lease—by the lessor; (e) in the case of an instrument of exchange [including swap]—by the parties in equal shares, (f) in the case of a certificate of sale—by the purchaser of the property to which such certificate relates; (g) in the case of an instrument of partition—by the parties thereto in proportion to their respective shares in the whole property partitioned or, when the partition is made in execution of an order passed by a Revenue-authority or Civil Court or arbitrator, in such proportion as such authority, Court or arbitrator directs. (h) in the case of sale of security through stock exchange, by the buyer of such security; (i) in the case of sale of security otherwise than through a stock exchange, by the seller of such security; (j) in the case of transfer of security through a depository, by the transferor of such security; (k) in the case of transfer of security otherwise than through a stock exchange or depository, by the transferor of such security; (l) in the case of issue of security, whether through a stock exchange or a depository or otherwise, by the issuer of such security; and (m) in the case of any other instrument not specified herein, by the person making, drawing or executing such instrument.] | In the absence of any agreement to the contrary, the expense of providing the proper stamp shall be borne – (a) in the case of any instrument described in any of the following Articles of Schedules, namely: – No. 1 of Schedule I. (Bill of Exchange), No. 3 of Schedule I. (Debenture), No. 6 of Schedule I. (Promissory-note), No. 10(c) of Schedule I. (Transfer of any interest secured by a bond, mortgage-deed or policy of insurance), No. 2 of Schedule II. (Administration Bonds), No. 6 of Schedule II. (Agreement relating to deposit of Title Deeds, Pawn or Pledge), No. 13 of Schedule II. (Bonds), No. 14 of Schedule II.(Bottomry Bond), No. 24 of Schedule II. (Customs Bond), No. 29 of Schedule II. (Further Charge), No. 30 of Schedule II. (Gift deed), No. 31 of Schedule II.(Indemnity-Bond), No. 36 of Schedule II.(Mortgage-deed), No. 47 of Schedule II.(Release), No. 48 of Schedule II (Respondentia Bond), No. 49 of Schedule II. (Security Bond or Mortgage-deed), No. 50 of Schedule II. (Settlement), by the person drawing, making or executing such instrument; (b) in the case of a policy of insurance other than fire-insurance, by the person effecting the insurance; (c) in the case of a policy of fire-insurance, by the person issuing the policy; (d) in the case of a conveyance (including a reconveyance of mortgaged property), by the grantee: (e) in the case of a lease or agreement to lease, by the lessee or intended lessee; (f) in the case of a counterpart of a lease, by the lessor; (g) in the case of an instrument of exchange including swap, by the parties in equal shares; (h) in the case of a certificate of sale, by the purchaser of the property to which such certificate relates; (i) in the case of an instrument of partition, by the parties thereto in proportion to their respective shares in the whole property partitioned, or, when the partition is made in execution of an order passed by a Revenue authority or civil court or arbitrator, in such proportion as such authority, court or arbitrator directs; (j) in the case of sale of security through stock exchange, by the buyer of such security; (k) in the case of sale of security otherwise than through a stock exchange, by the seller of such security; (l) in the case of transfer of security through a depository, by the transferor of such security; (m) in the case of transfer of security otherwise than through a stock exchange or depository, by the transferor of such security; (n) in the case of issue of security, whether through a stock exchange or a depository or otherwise, by the issuer of such security; and (o) in the case of any other instrument not specified herein, by the person making, drawing or executing such instrument. | The definition of debentures was inserted through Act 7 of 2019[3]. The Bill here proposes to make debentures a central subject on which stamp duty shall be levied by the Central Government. The duty on the same shall be payable by the person drawing, making or executing the instrument. Simultaneously, the gift deed is proposed to be included under schedule II. on which the duty shall be payable by the person drawing, making or executing the deed. Further, the following persons shall be liable to pay stamp duty in the following cases- i. Issue of securities- the issuer of the securities ii. Other instruments- person executing the instrument |
Inclusions proposed through certain new provisions
| Proposed insertions | Our comments |
| (9) “Chief Controlling Revenue Authority” means, an officer whom the State Government by notification in the Official Gazette appoints in this behalf; | Although the roles and duties of the chief controlling revenue officer have been provided under several provisions of the Act (for instance, see section 45, 56, 57), the authority has not been defined yet. The proposed Bill attempts to define the chief controlling revenue officer, providing clarity regarding the officer responsible for such duties. |
| 57A. Instruments under- valued how to be dealt with- (1) Where the registering officer appointed under the Registration Act, 1908, while registering any instrument of conveyance, exchange, gift, partition or settlement, has reasons to believe that the value of the property or the consideration, as the case may be, has not been truly set forth in the instrument, he may, after registering such instrument, refer the same to the Collector for determination of the value or consideration, as the case may be, and the proper duty payable thereon. (2) The Collector, on receipt of a reference under sub-section (1), or suo-moto, or otherwise, if he has reasons to believe that the instrument of conveyance, exchange, gift, partition or settlement is not duly stamped, he shall, after giving the parties a reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by rules made under this Act, determine the value or consideration or the duty as aforesaid and the deficient amount of duty, if any, shall be payable by the person liable to pay the duty. (3) A person aggrieved by an order of the Collector under sub- section (2) may, within thirty days from the date of the order, prefer an appeal before the Chief Controlling Revenue-Authority and all such appeals shall be heard and disposed of in such manner as may be prescribed by rules made under this Act. | Most of the state stamp Acts provided for the provision to deal with undervalued instruments. However, the Stamp Act, 1899 has no such provision yet. Section 57A of the draft Bill states the procedure to deal with undervalued instruments. |
| 72. General Penalty- (1) Any person who contravenes any of the provisions of the act, or any rules made therein, for which no penalty has been separately provided for in this act, shall be liable to pay penalty which may extend to 25 thousand rupees; and in case of a contravention which is of a continuing nature, a penalty of up to rupees 1000 per day, to be levied by the Collector. (2) No penalty shall be imposed without giving an opportunity of hearing to the party concerned. | Chapter VII of the Stamp Act, 1899 provides provisions relating to “CRIMINAL OFFENCES AND PROCEDURE”. Under chapter VIII, “SUPPLEMENTAL PROVISIONS” relating to inspection of books, power of central government, etc. has been provided. However the Bill seeks to consolidate both of these chapters and to provide a general penalty of twenty-five thousand rupees with additional 1000 / day in case of continuing default. This provision seeks to govern offences relating to the Act, for which no specific penalty has been provided elsewhere. |
Changes in the Schedule
Since the 2019 amendment, the Act contains a single Schedule providing the rates of duty payable in relation to the instruments mentioned thereunder. However, the Draft Bill seeks bifurcation of the Schedule into two.
Schedule I, which is propelled to be made a Union subject containing details of stamp duty on instruments covered under List I of the seventh schedule to the Constitution of India.
Schedule II on the other hand, stands as a State subject containing details of stamp duty on instruments covered under List II of the seventh schedule to the Constitution of India.
Concluding remarks
The Indian Stamp Act, 1899 has served India for several years now. A number of provisions contained in the 1899 Act have become redundant, there is therefore a need to re-organise the same. The proposed Bill rightly seeks to revamp the century-old Act and enact a new legislation to deal with the realities and objectives of the 21st century. It also aligns with several other Act for instance, SEZ Act, some state stamp Acts, etc. Removal of the inoperative provisions, simplified stamp rates along with digital convenience will simplify the framework thus aiding better implementation and revenue to the government.
[1] https://www.dor.gov.in/sites/default/files/stamp%20duty%202023.pdf
[2] https://www.indiacode.nic.in/bitstream/123456789/15510/1/a1899-2%20.pdf
[3] https://nsdl.co.in/downloadables/pdf/Finance%20Act%202019.pdf
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