Stamp
Duty on Issuance of Share Certificate
In Delhi (Physical/
Demat)
Indian Stamp Act, 1899 along
with Delhi Stamp Act and Notifications
(11th February 2025)
INTRODUCTION:
The
author will cover the "The Provisions and Process of Payment of Stamp
Duty on Issuance of Share Certificate in Delhi and difference between rate of
Stamp Duty while Issuance of Share Certificate in Physical as well as in Demat"
in this column.
SHORT SUMMARY:
Stamp
duty is an obligatory tax imposed on some legal documents to give them legal
legitimacy. In India, the issue of share certificates involves stamp duty,
which varies from state to state. In Delhi, the stamp duty on share
certificates is governed by the Indian Stamp Act, 1899, and the applicable
notifications issued by the Government of Delhi.
The
payment of stamp duty on the issuance of share certificates is a central
matter, but its collection and administration are handled by the respective
state governments.
v Legal Framework Governing Stamp Duty:
ü Indian
Stamp Act, 1899: Governs the payment of stamp duty
on instruments, including share certificates.
ü Delhi
Stamp Act & Notifications: The applicable stamp
duty rates for share certificates are determined by state-specific provisions.
ü Companies
Act, 2013: Section 56 and Rule 5 of the Companies
(Share Capital and Debentures) Rules, 2014 mandate issuing share certificates
within 60 days of allotment.
ü Impact
of Finance Act, 2019
LEGAL FRAMEWORK:
1.
Indian Stamp Act, 1899
(Central Act)
o
Governs the levy of
stamp duty on various instruments, including share certificates.
o
Amended in 2020
to introduce uniform stamp duty rates across India for Demat of Shares.
2.
Amendment Effective
from July 1, 2020
o
The Finance Act,
2019, introduced changes to the Indian Stamp Act, which became effective
from July 1, 2020.
o
Stamp duty on share
certificates is now uniform across all states (Demat Shares) at 0.005%
of the total value of shares issued.
o
Stamp duty on physical
issuance of share certificate in delhi is 0.1% of the consideration value of
shares.
o
The duty is collected
by the respective state governments, even though the rate is determined
centrally.
3.
State vs. Central Role:
o
Defines and regulates
stamp duty rates on the issuance of share certificates.
o
Ensures uniformity in
stamp duty across all states.
o
Responsible for the collection
of stamp duty.
o
Manage e-stamping
portals (such as SHCIL) for stamp duty payments.
o
Prescribe procedural
aspects of stamp duty administration within their jurisdiction.
Thus, while the rate is fixed centrally, the collection
and procedural implementation remain a state subject.
The Delhi Stamp Act, 2001 continues to
govern stamp duty on physical share certificates, and there has been no
revision in the applicable rate post July 2020
RATE OF STAMP DUTY:
The stamp duty on the issuance of physical share
certificates in Delhi remains 0.1% of the face value or market value (whichever
is higher). This means ₹1
per ₹1,000 of the
share value.
PROCEDURE FOR SUBMISSION OF STAMP DUTY
IN DELHI:
I.
Allotment of
Shares and filing of Form PAS-3.
II.
Issuance of
Share Certificates within 60 days of Allotment of Shares.
III.
Preparation of Documents:
After issuance of share certificates, Stamp duty shall be paid to the
government within 30 (Thirty) days from issue of Share Certificates. The
following documents shall be prepared:
a)
Covering Letter
b)
List of Directors.
c)
List of Shareholders.
d)
List of Allottees
e)
Copy of Original Share Certificate
f)
Certified Copy of PAS-3 with Challan.
g)
Certified Copy of Memorandum & Article of Association.
h)
Authority letter in favour of Director / Professional.
IV.
Calculation of Stamp
Duty
Compute the stamp duty payable based on the face
value and premium (if any) of the shares allotted.
V.
Accessing the SHCIL
Portal
The Government of Delhi facilitates the e-payment
of stamp duty through the Stock Holding Corporation of India Limited (SHCIL)
portal.
VI.
Registration on SHCIL Portal
·
Visit http://www.shcilestamp.com/estamp_share_issuance.html
·
Register as a user if not already registered.
·
Log in and select Delhi as the state.
VII.
Entering Transaction
Details
·
Select Non-Judicial Stamp Duty Payment.
·
Choose Share Certificates as the document type.
·
Enter details such as company name, number of shares, and stamp duty
amount.
VIII.
Issue of Challan:
Challan has been issued by department online in
the login id
IX.
Payment of Stamp Duty
·
Proceed to make the payment via net banking, debit card, or UPI on
SHCIL site.
·
After payment of challan. Receive the copy of Stamp paper of duty
value from the office of SHCIL
·
After successful receipt of challan, submit the copy of Challan on
SHCIL website in log id.
X.
Affixing Stamp Duty on
Share Certificates
·
Print the e-Stamp Certificate and attach it to the physical share
certificates.
·
The share certificates should then be signed by two directors or one
director and the company secretary, as per the Companies Act, 2013.
Penalty
for Non-Payment of Stamp Duty: Failure
to pay stamp duty on share certificates may result in:
·
Penalty up to ten times
the stamp duty amount as per Section 62 of the Indian Stamp Act, 1899.
·
The document being
inadmissible as evidence in legal proceedings.
ARE
DEMATERIALIZED SHARES SUBJECT TO STAMP DUTY?
Yes,
after the amendment in July 2020, dematerialized shares are also subject to
stamp duty on issuance of Share Certificate.
Key
Changes After July 1, 2020:
1.
Centralized Collection
of Stamp Duty:
o
Stamp duty on the
issuance and transfer of securities, including dematerialized shares, is now
collected by depositories (e.g., NSDL, CDSL) and distributed to the respective
state governments.
o
Earlier, stamp duty was
levied only on physical share certificates at the state level.
2.
Rate of Stamp Duty:
o
For the issue of
securities (including demat shares): 0.005% of the total market value.
o
For the transfer of
securities in demat form: 0.015% of the consideration value.
3.
Who Pays the Stamp
Duty?
o
For the issuance of
demat shares: The company issuing the shares must pay the stamp duty through
the depository.
o
For transfer of demat
shares: The buyer pays the stamp duty, which is collected by the stock exchange
or depository.
Conclusion:
Ensuring timely payment
of stamp duty on share certificates is crucial for legal compliance. By
following the above process and using the prescribed formats, companies can
efficiently manage their stamp duty obligations in Delhi.
Author – CS
Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from
Delhi and can be contacted at csdiveshgoyal@gmail.com).
Disclaimer:
The entire contents of this document have been prepared based on relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness, and
reliability of the information provided, I assume no responsibility, therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not professional advice and is subject to change without notice.
I assume no responsibility for the consequences of the use of suchinformation.