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Stamp Duty



Stamp duty is levied on the market value of property involved in a sale, gift, exchange or settlement. The market value of the property is the value it would fetch if sold in the open market. Any sale or transfer of property involves payment of stamp duty.


What is the purpose of Stamp duty?

The purpose of enacting such an Act is to raise revenue for the local governments. Additionally, payment of stamp duty imparts legality to the document and this can be submitted as an authentic document in courts.


What is stamp duty? Why should stamp duty be paid?

It is a tax, similar to sales tax (VAT) and income tax collected by the Government. Stamp Duty is payable under section 3 of the Indian Stamp Act, 1899. Rates of Stamp Duty payable for different types of documents are as per Schedule I. Stamp Duty must be paid in full and on time. If there is a delay in payment of stamp duty, it attracts penalty. A stamp duty paid document gets evidentiary value and is admitted as evidence in court. Document not properly stamped, is not admitted as evidence by the Court.


How should one sign an instrument affixed with adhesive stamp?

As per the provisions of section 12, any person executing an instrument affixed with adhesive stamp, shall cancel the adhesive stamp so affixed by writing on or across the stamp his name or initials. If such an adhesive stamp has not been cancelled in the aforesaid manner, such a stamp is deemed to be unstamped.


How should instruments stamped with impressed stamp be written?

As per the provision of section 13 of the Indian Stamp Act, 1899, any instrument on an impressed stamp, shall be written in such manner that the stamp may appear on the face of the instrument and cannot be used for or applied to any other instrument i.e., cancel the adhesive stamp so affixed by writing on or across the stamp his name or initials. If such an adhesive stamp has not been cancelled in the aforesaid manner, such a stamp is deemed to be unstamped.


What if the stamp paper purchased in one state for property in another state ?

In case a document is executed on stamp paper purchased in one state  for property situated in another state, if the stamp duty paid is less than the duty prescribed under the Indian Stamp Act, or as per the state, then  the deficit duty has to be paid.


How to make the payment on underpaid stamp duty document.

The rules made under the stamp legislation applicable of  the particular state, where the property is located,  shall prescribe the manner of making the deficiency of Payment and thus making the document valid. As a normal Practice, the amount of  stamp duty,  with which the document is chargeable in the state, where the property  is located, has to be paid to the Collector having jurisdiction who then makes an endorsement upon the document to the effect that the document is duly stamped, whereupon the document becomes valid and enforceable.


What is the Jurisdiction and from which Place one should buy the Stamp Papers.

It is advisable to use the stamp papers of the same state where the document is  being  executed or where the Property is located, Since the Collection of Stamp duty happens to be the matter of that particular state. But in case of registration of any legal document the registration and stamp duty / Stamp Papers are to be of and at same place.


How is a property subject to mortgage, when transferred to the mortgagee, charged?

As per the provision of section 24, when any property subject to a mortgage is transferred to the mortgagee, he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.


When can one ask for refund of stamp duty?

As per the provisions of sections 49, 50, 52, 53 and 54, Stamp Duty can be refunded under the following circumstances:

1.    Spoiled Stamps;

2.    Misused Stamps;

3.    Stamps used in excess of the value required; and

4.    Stamps not required for use.


Can stamp duty be paid in India, for documents executed outside India?

As per section 18 of the Indian Stamp Act, 1899, any instrument executed out of India can be stamped in India, provided it is stamped within 3 months from the date it has been first received in India.


On what basis the Stamp Duty is paid ?

The Stamp Duty  is paid on basis of  the value of property, or the Circle rate, whichever is higher.


How stamp duty payable can be determined?

Usually, the executor himself can calculate the stamp duty payable on document as per the Circle Rates determined by the revenue department of that particular area or as  per the rates provided in the Indian Stamp Act, 1899 or the State Stamp Act, as the case may be. Under section 31 of the Indian Stamp Act, 1899, the executor can also apply to the Collector of Stamps after payment of the requisite fee, for the purpose of obtaining the opinion of the Collector of Stamps as to the amount of stamp duty chargeable on the instrument.


Is Stamp Duty required to be paid on all documents regarding transfer of properties?

All transfer Instrument/document including agreement to sale, conveyance, gift mortgage, exchange, partition, power of attorney either general or special leave and license, agreement, tenancy agreement, lease deeds are required to be stamped before registration. A will or original nomination in a Co-operative Housing Society is not required to be stamped. However, when a nominee transfers a flat subsequently in the name of legal heirs then it is required to be stamped as per market value or the consideration amount, whichever is higher.


Is a WILL made by an individual chargeable to stamp duty?

No stamp duty is payable on an instrument of WILL whether subject to the Indian Stamp Act or any state laws.


Is there any penalty for violation of Stamp laws?

Yes. The penal provision includes imprisonment and fine or both for offences under the Stamp Laws.


What are the consequences of nonpayment of stamp duty?

Every person having by law an authority to receive evidence and every person in charge of public office before whom any instrument chargeable, in his opinion, with duty, is produced or comes in performance in his function, shall, if it appears to him if such instrument is not duly stamped, impound the same.

No instrument chargeable with duty is admitted in evidence for any purpose or can be acted upon, registered or authenticated unless such instrument is duly stamped.


Is there a time frame within which the Stamp Paper must be used?

A stamp paper should be used within six (6) months from the date of purchase. Any stamps not used within this period are invalid.


What point of time of Stamp Duty payable?

The Section 17 & 18 of the Act states the time of payment stamp duty. Generally, all the instruments executed in the state shall be stamped before or at the time of execution or immediately thereafter or on the next working day following the day of execution. Similarly, the instruments, which are executed out of the state and within three months from its receipt in the state shall be stamped.


Is a refund possible if the Agreement has not been signed and the parties have paid the Stamp Duty and the transaction is called off?

When a person has stamps in his possession which have been spoiled or rendered unfit or the person does not require to immediately use the said stamps, or the transaction is called off then such a person should deliver the above said stamps to the Collector of Stamps.

In this case, the person is required to make an application within six (6) months from the date of the purchase of stamps. Under section 52 of the Bombay Stamp Act, the person should also submit the affidavit mentioning the reasons for which the Stamps were purchased and the reasons why the refund application is being made.


In whose name should the stamp paper be purchased? If it is purchased in the name of an Advocate, can the client exercise the document?

The stamp papers should be in the name of one of the parties who have signed/who would be signing the instruments.


Is there a penalty for not paying the requisite stamp duty?

Section 34 of the Bombay Stamp Act, 1958, provides a penalty of 2% per month of the deficient portion of the stamp duty for every month or part thereof, from the date of execution of the instrument, subject to a maximum of 2 times the deficient portion of duty.


In case of resale of the flat, who is required to pay the stamp duty the purchaser or the seller?

The parties can decide who shall pay the Stamp Duty. As per section 30 of the Bombay Stamp Act, 1958, if nothing is mentioned in the agreement and if the transaction relates to resale of flats then the stamp duty will have to be paid by the purchaser, and  in case of exchange of properties, both parties have to bear stamp duty equally.


Kindly Note :  In case of any doubt on stamp duty payable on any document, an application may be made to the District Registrar / Dy. Commissioner of Stamps  with a draft of the proposed deed or the actual deed itself.  Also an affidavit on stamp paper along with prescribed fee should be submitted along with.