Stamp duty is a tax levied by the state on documents that are registered with the government. In India, the Indian Stamp Act, 1899, governs the guidelines for stamp duty. It is a state subject under . There are certain documents specified by law which require mandatory stamp duty as specified in Section 3 of the said act. Without the due payment of prescribed stamp duty these would be but just papers.
The Act was introduced by the British during the colonial period as a means to yield revenue. Stamp duty is a state matter and can only be levied by the state. In India, each state fixes its own rates on duties. Simply put, it is nothing but a charge on the service of registration provided by the bureaucracy.
The Indian Registration Act, 1908, governs the registration of documents. The Act specifies the documents that require compulsory registration in Section 17 and the ones whose registration is optional in section 18. In cases of immovable property, it must be presented to the sub registrar of the sub district in which the property is located (Section 28).
Under Article 246 of the Constitution of India, the legislative powers of the parliament, the state legislature and the matters in which both have the legislative power. They are clearly listed out in the Seventh Schedule of the constitution. Pertaining to stamp duty, the powers are as given below.
List I – Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts come under the Union list on which Parliament has exclusive power to legislate.
List II – Rates of stamp duty in respect of documents other than those specified in the provisions of Union list with regard to rates of stamp duty come under the State list which means the state has the power to legislate.
List III – Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty come under the concurrent list which means both the centre and the state have the legislative power in this matter.
Need for Registration:
1. It will be registered with the government safely: Record of the ownership of immovable properties are safely kept with the registrar. For instance, in the case of lands, it is better to register both the sale deed (transfer of the land) and the ownership of the current landowner.
2. It gives legality to the documents: Registration of documents through due procedure and verifications will assure the genuineness of the document’s background. This thus makes it highly reliable and gives it a legal status. This will later safeguard the persons during settlement of disputes in a court of law or any government body.
3. Evidentiary value: They are the evidence of a person’s title/ownership of any immovable property, amount of considerations in a trade document, or other vital information. Hence in order to protect oneself against fraud and other malpractices, it is always advisable to register the documents.
Some documents that are to be registered compulsorily:
- Gifts of immovable property – Section 123 of the transfer of property act requires the gist deeds to be registered for the transfer of title of the property to be legally enforceable.
- Instrument of partition of immovable property.
- Lease of immovable property.
- Transfer of decree, order or award of court.
- Authority to adopt a son.
- Receipts of transaction of movable consideration.
- Receipts of monetary considerations received.
- Time Limit (S.23) – Within four months of the execution of the document, it must be presented for registration before the appropriate authority. Wills are exempted from this limitation.
- Delay in presentation (S.25) – The registrar should be convinced that the delay in presentation of the document (except Will) for registration is due to an accident or an urgent necessity. A fine amount not exceeding ten times the registration-fee is imposed and then the document is accepted for registration. This process is initiated through an application to the sub-registrar.
- Place of registration (S.28) – Documents of immovable property must be registered with the sub-registrar’s office in which the property or a part of it is located. Any other document must be registered either with the sub-registrar in whose district the document has been executed or in any other sub registrar’s office whose district the parties want the document to be registered. Under special causes, the registrar may go to the residence of the party to register their document or deposit their Will.
- Who can present (S.32) – The documents or copy of decree or order can be presented for registration by a person who is executing or claiming under the document or decree or order respectively. It can also be presented by a representative or assignee of such a person. The agents of such person or the representative or assignee can also present it provided that they were duly authorised by power- of- attorney executed and authenticated properly (S.33).
- Presentation (S.80) – The document must be presented for registration with a passport size and fingerprints of the party/parties of the document along with the fees for the registration of documents under this Act.
Steps for duly stamping an instrument:
Documents can get duly stamped in places that are authorised to issue stamps. An amount equal to the value of the stamp duty is to be paid to the appropriate authorities/vendors to purchase the stamps. E-stamping has also been introduced for convenience.
- A non-judicial stamp paper for the appropriate value of the stamp duty must be purchased from a vendor. These are specially licensed vendors which allows them to deal with these stamp papers while others cannot. The details of the transaction is to be written in the stamp paper or the paper be simply affixed to the documents that are to be registered. The stamp paper must bear the signature of all the executants of the document.
- There are banks and franking agencies that are authorised to use the franking machine. An application must be submitted to the one where you want to get your documents stamped. The document that requires the stamp duty in the case will be printed on a plain paper. A special adhesive stamp by the franking machine is affixed on it for the value of the stamp duty.
- To get your documents e-stamped, visit shcilestamp.com which is the website of the Stock Holding Corporation of India Limited (SHCIL). They are appointed as the responsible body for all e-stamping operations taking place in India. First check if the facility is available to your state. Online payment can be made through debit cards, credit cards, pay orders, RTGS, NEFT or through an account-to-account transfer. They also have authorised collection centres, ususally some banks, which will do it for you and issue a stamp certificate. Payment can be made to them through cheques, demand drafts or cash. This facility is not available in Maharashtra.
Penalty for under-stamping:
Stamp duty plays an important role here, in that, when the stamp duty is required in a registration but the document has either not been stamped or under stamped. The collector has the authority to impose penalty regarding stamp duty matters in the district level. The person is liable to pay the amount of the insufficient stamp duty along with a fine of Rs.500 or the amount that maybe upto 10 times the nominal value of the stamp.
Payment of stamp duty in full is expected from the executants of a document. Failing to do so will attract fine and even imprisonment. Pertaining to property documents, 2% of the deficit amount in the payable stamp duty per month is payable. The penalty can reach up to 200% of the deficit amount.
Types of stamp duty:
- Impressed stamps- stamps that are embossed/fixed/impressed. For instance, stamp papers.
- Adhesive stamps-ones that can be stuck on the documents. These can be classified as postal and non-postal stamps.
- E-stamps- electronic stamping whose record is stored online and a certificate of stamping is issued.
Usage of these in a document denotes due payment of stamp duty up to the face value of the stamp.
Calculation of stamp duty:
It is calculated based on the value of property. It comes upto 10% of either the value of the property at the time of registration or on its minimum value as fixed by the local authorities, whichever is higher.
In new Central Jute Mills v. State of West Bengal,[i] the fact that stamp duty is a state subject is reiterated. When an instrument has to be executed in a state, it must bear the stamp of that particular state in which it is executed or where the property is located. When the plaintiff’s instrument bore the stamp of the West Bengal wherein the execution of the instrument is done in Uttar Pradesh, the state held that the instrument was not duly stamped. The Supreme Court of India upheld the decision and stated that the instruments must bear the stamp of the state in which the first dutiable event of such instrument takes place.
In M/S Shriram EPC Ltd., versus Rioglass Solar,[ii] an appeal stating that the for the execution of a foreign award in India, it must be duly stamped, was dismissed by the Supreme Court. An award by the International Criminal Court which was delivered in London was to be executed in India. The question of whether it is executable without any stamp duty arose. The court after meticulous interpretation of the Stamp Duty Act, held that the duty is not leviable on foreign awards.
Stamp duty differs from state to state and one must exercise due care and caution while ascertaining the stamp value for their instrument. One of the general burdens faced by the stamp duty is that after the GST laws came into existence, people are burdened with double taxation while buying under-construction houses. They are having to pay 12% GST along with a 5%-10% stamp duty during registration. This gives rise to the said problem double taxation to the buyers. It has been suggested by experts that stamp duty on real estates exclusively should be abolished and added to the new GST laws.[iii]
Edited by Pragash Boopal
Approved & Published – Sakshi Raje
[i] New Central Jute Mills Co., Ltd., and others Versus The State of West Bengal and others,(Advocates-General, Andhra Pradesh, Madhya Pradesh and Maharashtra) LNIND 1963 SC 5
[ii] M/S Shriram EPC Ltd., versus Rioglass Solar SA LNIND 2018 SC 468.
[iii]Is stamp duty a hurdle for home buyers?, https://content.magicbricks.com/property-news/is-stamp-duty-a-hurdle-for-home-buyers/100812.html