CS Divesh Goyal
Summary
The amendments to the Indian Stamp Act 1899 (Act) have come into effect from 1 July 2020. These amendments were first proposed under the Finance Act of 2019 and the Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 (Rules).
The amendments propose a uniform system for collection and payment of stamp duty on the issue and transfer of securities. Thus, it would result in effective collection of duty across all States and reduce instances of evasion/ avoidance of stamp duty payments.
In this article, we intend to cover stamp duty aspects in the case of the issue and transfer of shares in both, physical as well Demat form.
Rates of Stamp Duty on Transfer of Shares
Following are the rates of stamp duty on transfer of shares as per schedule I of the
Stamp Duty Act, 1899 ('the Act') w.e.f. July 1, 2020
|
S.No. |
Instrument |
Rate of Stamp Duty Post Amendment (on consideration value) |
|
A. |
Transfer and Re-Issue of debentures |
0.0001% |
|
B. |
Transfer of security other than debenture on delivery basis (Securities credited in dematerialized account of purchaser) |
0.015% |
|
C. |
Transfer of security other than debenture on non- delivery basis (Securities purchased and sold on same day, not credited in Demat account of purchaser) |
0.003% |
A. Who will pay the Stamp Duty?
|
S.No. Nature of Transaction Responsibility |
||
|
A. |
In case of transfer through stock exchange |
Buyer |
|
B. |
Transfer of Security through depository |
Sellor |
|
C. |
In case of transfer of securities in physical form |
By person making, drawing or executing such instrument |
D. Whether Stamp duty required to pay on on transfer of shares in Demat form?
Answer: Transfer of dematerialized securities between beneficial owners was earlier exempted from stamp duty provisions under section 8A(c)(ii) & (iii) of the Act. The same has now been deleted and the exemption is only limited to transfer of securities from a person to a depository or from a depository to a beneficial owner.
Therefore, even in case of transfer of share in demat form required payment of stamp duty of 0.015% of consideration value.
E. What shall be the consideration for transfer of shares in different modes?
|
S.No. Nature of Transaction |
Market Value |
||
|
I. |
Sale of securities through Stock Exchange |
Traded Price |
|
|
II. |
Sale of securities through Depository incl. off market transfers, over the counter, etc. other than through stock exchanges |
Consideration/ price mentioned in delivery instruction Slip |
|
|
III. |
Issue of securities in demat mode |
Issue Price mentioned in Allotment List |
|
|
IV. |
Sale of securities through physical mode |
Consideration as mentioned in Transfer Deed (SH- 4) |
|
F. Whether Gift of Securities liable for stamp duty after amendment?
Answer: The stamp duty is to be collected on market value based on price or consideration involved. Accordingly, since consideration involved in case of gift is 'Nil', no stamp duty will be levied in such transaction w.e.f. July 01, 2020.
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