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INDIAN STAMP ACT, 1899

1. SCOPE, APPLICABILITY & OBJECT BEHIND THE ACT

 It came into force on 1st day of July 1899.
Applicability  The Act Contains total 94 Sections and divided into 8 Chapters and there is a
SCHEDULE which contains the RATES of stamp duties on various instruments.
Scope Under this act stamp duty is leviable on an instrument and NOT on transaction.
 Prime object of this act is to raise revenue for the state.
 Levy of stamp duty is a state subject, but in certain cases parliament has the
Object
power to fix the rates of duty.
 For eg. Bills of Exchange, Promissory notes, transfer of shares are such instruments.

2. IMPORTANT DEFINITIONS

a) Bill of Lading

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b) CONVEYANCING
AS PER STAMP ACT:
The term “Conveyance”, is defined under Section 2(10) of the Indian Stamp Act, 1899,
Conveyancing “includes:
(a) a conveyance on SALE and
(b) Every instrument-
(i) by which property, whether movable or immovable, is transferred inter vivos (between the living)
and
(ii) which is not otherwise specifically provided by Schedule I of the Act.”
 It does not include a will.

3. INSTRUMENT CHARGEABLE WITH DUTY [SECTION 3]

INSTRUMENT

Only those instruments Amount Indicated in Schedule 1

mentioned in schedule are
chargeable to stamp duty List of instruments mentioned in
otherwise not schedule

INSTRUMENTS CHARGEABLE WITH THE STAMP DUTY

Following instruments shall be chargeable with the amount of duty integrated

in the schedule.

 Instrument executed in India, whether it relates to property situated or to any matter or things to
be done in or out of India, is chargeable to stamp duty.
 Instruments executed out of India are chargeable to duty if they relate to some property
situated in India or some matter or thing done or to be done in India.
 Bills of Exchange and promissory notes.
Exception: - Bills of exchange payable on demand is not chargeable to stamp duty.

Instruments Exempted from Duty

 Instruments in favour of government these include instruments executed by or on behalf of or in
favour of government.
 Bills of exchange and promissory notes executed outside India and acted upon outside India.
 Instruments for the sale, transfer or other disposition of any ship or Vessel.

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4. SINGLE TRANSACTION EFFECTED BY SEVERAL INSTRUMENTS [SECTION 4]
Single transaction like sale, mortgage or settlement is completed by several documents.
MEANING In such a case it would inequitable/ unfair of all these instruments are subjected to stamp
duty.
Sec.4 provides as follows: -
A Principal Instrument only shall be chargeable to duty.
AMOUNT Transaction: -
OF a) Principal Document shall be chargeable, with duty prescribed in Schedule 1.
DUTY b) Other instruments called Subsidiary Instruments shall be chargeable with duty of Rs.
1.
(1) A lease is executed and got registered. A second document is executed altering the
terms of the first document. The 2nd document has to be stamped as a lease.
NOT
(2) ‘A’ purchaser of land executes a mortgage of the land in favour of the vendor for a
APPLICABLE
portion of the purchase money. The mortgage is liable to full duty as a separate
instrument.

DECIDED CASES
‘A’ executed a conveyance of immovable property. On the same deed his nephew
(undivided in status) endorsed his consent to the sale, as such consent was considered
to be necessary. It was held that the conveyance was the principal instrument. The
consent was chargeable with only 1 rupee.

[In Re. Maharaj Someshar Dutt]

Brother A executed in favour of brother B a GIFT of all his property. By another deed, brother B made
provision for the living expenses of brother A and hypothecating in favour of brother A.
It was held that the 2 documents were part of the same transaction. They amounted to a settlement
and Section 4 applied.

5. INSTRUMENT RELATING TO SEVERAL DISTINCT MATTERS [MULTIFARIOUS

INSTRUMENT] [SECTION 5]
Where Several Distinct matters or transactions are embodied in a Single Instrument. The
MEANING
instrument is called Multifarious Instruments. [i.e. The matter of different kind]
The aggregate amount of duties with which separate instruments each comprising or relating
AMOUNT OF to one such matter would be chargeable under this act”. (This is the reverse of the situation
DUTY governed by Section 4)
Section 5 applies even where the 2 (or more) matters are of the same description.
DECIDED CASES
1) A document containing both an agreement for the dissolution of a partnership and a bond, is
chargeable with the aggregate of the duties with which 2 such separate instruments would be
chargeable. They 2 are “distinct matters” [Chinmoyee Basu v. Sankare Prasad Singh].
2) A lease to joint tenants requires only one stamp.
3) Where a person having a representative capacity (as a trustee) and a personal capacity delegates his
powers in both the capacities, section 5 applies. In law, a person acting as a trustee is a different
Entity from the same person acting in his personal capacity.

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6. INSTRUMENTS COMING WITHIN SEVERAL DESCRIPTIONS IN SCHEDULE-1
(MULTI DISCRETION INSTRUMENTS) [SECTION 6]
MEANING & When an instrument falls within the provisions of 2 or more articles in schedule 1 and the
AMOUNT OF instrument does not contain distinct matters it is to be charged with the Highest of the
DUTY duties when the duties chargeable are different.
SCOPE The provisions of Sec.6 are subject to the provision by Sec.5 [Section 5 overrule Sec.6]
Where a deed:
(i) Contains a stipulation binding the executant to deliver his sugarcane crop to the
obligee under the deed and
EXAMPLE (ii) Also provides that the sugarcane crop is hypothecated as security for payment of
money advanced by the obligee,
the deed fulfills the dual character of the mortgage and a bond and is therefore chargeable
to the highest of the duties by virtue of section 6.

ANALYSIS OF (SECTION 4, 5 AND 6)

[Section 4]
[Section 5] [Section 6]
Single Transaction effected
Multifarious Instruments Multi discretion Instruments
by several Instruments

1 =Transaction 1 = Instruments
1 = Instruments
2=Instruments 2= Transaction
FALLS UNDER THE 2 HEADS
DUTY ONLY ON PRINCIPAL DUTY ON BOTH
HIGHEST OF DUTY PAID
INSTRUMENT TRANSACTIONS

7. REDUCTION, REMISSION AND COMPOUNDING OF DUTIES [SECTION 9]

Section 9 empowers the Government, (Central or the State as the case may be), to reduce or remit, whether
prospectively, or retrospectively,
 the duties payable on any instrument or class of instruments or
 in favour of particular class of persons or members of such class.

8. MODES OF PAYMENT OF STAMP DUTY [SECTION 10]

METHODS OF STAMPING
[Section 10]

Adhesive stamp Impressed Stamp

[Section 11] [Section 13]

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Adhesive Stamp
(Section 11)
The following instruments MAY BE stamped with adhesive stamps namely:
Instruments chargeable with duty not exceeding 10 paise EXCEPT Bills of exchange
payable otherwise then on demand.
Bills of exchange and Promissory Notes drawn or made out of India.
Entry as an advocate, vakil or attorney on the roll of a High Court.
Notarial Acts.
Use of Adhesive Instruments relating to Transfer of Shares of company.
Stamps The use of the words ‘may be stamped’ really connotes ‘shall be stamped’.

Sec.12 provides for the cancellation of adhesive stamps:

 at the time the stamp is affixed if the instrument has already been executed or
 at the time of execution.

The object of cancellation is to prevent the same stamps to being used again.

Sec.12 further provides that: -

Whoever affix any adhesive stamp on any instrument
chargeable with duty which has been executed by any person
Cancellation of shall, when affixing such stamps cancel the same by writing
Adhesive Stamps on all across the stamp:
(Section 12)  his name or
 Initials of his firm along with the date or
 In any other effectual manner.
1) Drawing a solitary (single) line across the stamps.
Effectual 2) Drawing of Diagonal lines across the stamp with the ends
Manner of extending on the paper or instrument.
Cancellation It may be notes that any instrument bearing an adhesive stamp,
which has not been cancelled shall be deemed to be unstamped.

Where one of the 4 stamps used on an instrument had a single line drawn across the
face of the stamp, the second had 2 parallel lines, the third 3 parallel lines and the
fourth 2 lines crossing each other, it was held that the stamps must be regarded as
Judicial having been cancelled in manner so that they could not be used again (In re. Tata Iron
Pronouncement Steel Company, 1928). Putting 2 lines crossing each other is effective.

Impressed Stamp
‘Impressed Stamp’ means stamp is impressed on the paper by
(Section 13)
mechanical means (these are the stamp papers we purchase
from stamp vendor).
Definition “Impressed stamp” means & includes:
[Sec. 2(13)] Labels Affixed and Impressed by the proper officer; and
Stamps embossed or engraved on stamp paper.
The instrument is duly stamped if it has been duly stamped at the time of execution
and is admissible in evidence, though the stamp is subsequently removed or lost [Mt.
Mewa Kunwari v.Bourey].

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Every instrument written upon paper stamped with an impressed stamp shall be written
Manner of use
in such manner that the stamp may appear on the face of the instrument and cannot
[Section 13]
be used for or applied to any other instrument.

9. TIME OF STAMPING OF INSTRUMENT

TIME OF STAMPING OF INSTRUMENT

SECTION 18 SECTION 19
SECTION 17
INSTRUMENTS
INSTRUMENTS BOE & PROMISSORY
EXECUTED OUTSIDE
EXECUTED IN INDIA DRAWN O/F INDIA
INDIA
Within 3 months of its first Any BOE payable
Stamped must be paid receipt [arrival] in India. (otherwise than on
before or at the time of This relates to Foreign demand) or Promissory
Execution. Instruments [other than Bills note drawn or made out of
of Exchange and Promissory India
notes], received in India;  must be stamped and
 the stamp cancelled,
Thus, where a promissory
Sec 18 is intended to mitigate before the first holder
note is executed by ‘A’ and
the inconvenience and hardship in India deals with the
‘B’ and a stamp is
that will entail if the instrument
afterwards affixed and instrument, [i.e.,
concerned is required to be
cancelled by ‘A’ by again presents the same for
stamped before or at the time of
signing it, the stamping has acceptance or
execution as laid down in Section
taken place subsequent to payment, or endorses
17. Instrument executed in India
the execution and hence, the
is not within Section 18. or otherwise negotiates
provisions of Section 17 are
[Nath Bank v. Andhar Mamik the same in India.]
not complied with
Tea Co.]
[Rohini v. Fernandes].

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10. VALUTION FOR DUTY [SECTION 20 -26]
Value of Amount Author’s Note-
is Expressed
Such Duty shall be Calculated on the value of Indian Currency according to “Current
in Foreign
Rate of Exchange” on the Day of the Date of the Instrument.
Currency
[i.e. DATE OF EXECUTION]
[Section 20]
VALUATION OF Where an instrument is chargeable with ad valorem duty in respect of any shares or
STOCK & of any marketable securities such as debentures or bond such duty shall be calculated
MARKETABLE on the value of such shares and securities on the- [MUTALLY DECIDE]
SECURITIES  Average Price [i.e. Average of Market Price]- IN CASE OF LISTED CO. or
[SECTION 21]  The value of day of date of the instruments. IN CASE OF UNLISTED- [BOOK VALUE]
 Where the shares are quoted on the stock exchange, it is easy to ascertain the
price of the shares or stock.
EFFECT OF  However, where the shares or stocks are not quoted on any stock exchange, the
STATEMENT OF valuation has to be based upon the AVERAGE of the latest private transactions,
RATE OF which can generally be ascertained from the principal officer of the company.
EXCHANGE
 If, there have been no dealings at all, then unless some other reliable evidence of
OR
market value is forthcoming the value is to be taken at PAR.
AVERAGE PRICE
 Section 22 of the Act, however, provides that if such price or value is mentioned
[SECTION 22]
in the instrument for the purpose of calculating duty, it shall be presumed (until
the contrary is proved) to be correct.
Section 23 provides that where interest is expressly made payable by the terms of the
INSTRUMENTS instrument, such instrument shall not be chargeable with a duty higher than that with
RESERVING which it would have been chargeable, had no mention of interest been made therein.
INTEREST For instance, a promissory note for Rs.10,000 is drawn with the recital of interest @
[SECTION 23] 18 % per annum, payable by the promissor; stamp is leviable on the basis that the
instrument is for Rs. 10,000 only.
Where any property is transferred to any person in satisfaction of any debt due to
such person, such debt shall be treated as consideration for valuation of a duty.
Explanation to Section 24 Provides that:
In case of sale of property is subject to a mortgage, any unpaid mortgage together with
interest due, if any, will be treated as part of consideration.
VALUATION IN [In re Mirabai, in re Laxman and Ganpat, Bom.]
CASE OF Where property transferred is subject to mortgage, duty already paid
TRANSFER IN in respect of mortgage will be deducted, In order to entitle the
CONSIDERATION mortgagee to a deduction of the duties payable the ENTIRE property mortgaged should
OF DEBT be transferred and NOT MERELY A PORTION of it.
[SECTION 24]
(a) ‘A’ owes ‘B’ Rs.1 lakh. A sells a property to B, the consideration being Rs.1, 50,000
and the release of previous debt being Rs.1, 00,000. Stamp duty is payable on Rs.2,
50,000. [Somayya Organics Ltd. v. Board of Revenue, 1986 SC]
(b) ‘A’ sells property to ‘B’ for Rs. 500, which is subject to a mortgage to C for Rs. 1,000
and unpaid interest of Rs. 200. The stamp duty is payable on Rs. 1,700.

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(c) A’ mortgages a house of the value of Rs. 10,000/- to B for Rs. 5,000/-. B afterwards
buys the house from A. Stamp duty is payable on Rs. 10,000/- less the amount of
stamp duty already paid for the mortgage.
.

Sec.25 provides for the mode of assessment of duty in case of agreements that
provides for payment for annuity i.e. Installment payments and not lump sum
payment. In such cases valuation is done in the following manner-
VALUATION IN (1) IF PERIOD OF ANNUITY IS DEFINITE -> Total amount of annuity is to be paid shall
CASE OF be considered.
ANNUITY (2) IF PERIOD OF ANNUITY IS INDEFINITE-> Total amount payable within 20 years of
[SECTION 25] the date of first payment.
(3) IF SUBJECT TO LIFE OF A PERSON-> Annuity payable for 12 years from the date
of first payment.

11. CONSIDERATION TO BE SET OUT [SECTION 27]

Section 27 provides that the consideration and all other facts and circumstances affecting:
 the chargeability of any instrument with duty or
 the amount of duty with which it is chargeable
shall be fully and truly set forth in the instrument.

 “Value of any property” would mean that REAL VALUE of the property in the open market at the time
the document was executed and NOT at the time when the executant acquired it.

Where there is no value set forth in the instruments, there would be contravention of Section
27, but the omission does not render the document inadmissible or liable to be impounded
and taxed in the manner provided in Section 35 [Vinayak v. Hasan Ali, MP].

12. WHO SHOULD PAY THE STAMP DUTY [SECTION 29]

1. In case of promissory notes and bills of exchange – The maker or drawer.
2. In case of mortgage deed – The person executing the instrument i.e. mortgager.
3. In case of Insurance – The insurer.
4. In case of conveyance – The transferee
5. In case of lease – The lessee
6. In case of partition deed – Parties to partition have to pay stamp duty in proportion to their respective
shares in the property.

13. RECEIPTS [SECTION 30]

Any person receiving:
 any money exceeding Rs. 20 in amount or
 any bill of exchange, cheque or promissory note for an amount exceeding Rs. 500 or
 in satisfaction of a debt any movable property exceeding Rs. 500 in value,
shall on demand by the person paying or delivering such money, bill, cheque, note, or property, give
a duly stamped receipt for the same.

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14. ADJUDICATION AS TO STAMPS [SECTION 31]

When the document or any draft of the document is produced to the Collector he shall determine the proper
stamp duty on payment of a nominal fee.

Under Section 31(1) when:

(i) any instrument, (whether executed or not and whether previously stamped or not), is brought to the
Collector, and
(ii) the person bringing it applies to have the opinion of that officer as to the duty if any, with which it is
chargeable, and
(iii) pays a fee, the Collector shall determine the duty if any with which in his judgment, the instrument is
chargeable.

15. INSTRUMENTS NOT DULY STAMPED – INADMISSIBLE IN EVIDENCE

[SECTION 35 to 37]
Section 35 stipulates that no instrument chargeable with duty shall be–
a) Admitted in evidence for any purpose whatsoever by any person authorised
by law (such as judges or commissioners) or by the consent of the parties
Instruments not
(such as arbitrators) to record evidence; or
Duly Stamped
b) Shall be acted upon; or
Inadmissible in
c) Registered; or
Evidence
d) Authenticated by any such person as aforesaid or by any public officer
[Section 35]
UNLESS such instrument is duly stamped.
An insufficiently stamped instrument is not an invalid document and it can be
admitted in evidence on payment of Penalty.
The proviso to Section 35 provides exception to section 35 as under: -
(a) Any instrument be admitted in evidence on payment of the duty with which the
same is chargeable, or, in the case of an instrument insufficiently stamped, of
the amount required to make up such duty, together with a penalty of Rs. 5/-
Cases Where or 10 times the amount of the proper duty or deficient portion, whichever is
Unstamped higher.
Instrument can (b) Unstamped receipt would be admissible in evidence on payment of a penalty of
be Admitted in Re. 1/-.
Evidence (c) Any instrument can be admitted in evidence in any proceeding in a criminal
Court.
(d) When such instrument has been executed by or on behalf of the Government, it
is admissible.
[Guni Ram v. Kodar].
Section 36 provides that where an instrument has been admitted in evidence, such
Admission of
an admission shall not be questioned at any stage of the same suit or proceeding on
Instruments
the ground that the instrument has not been duly stamped.
(Where not to be
Questioned) Notwithstanding any objection, the trial Court admits the document, the matter ends
[Section 36] there and the Court cannot subsequently order the deficiency to be made and levy
penalty. [Bhupathi Nath v. Basanta Kumar, 1936 Cal.].

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16. INSTRUMENTS UNDULY STAMPED BY ACCIDENT [SECTION 41]
Section 41 deals with cases where a person, of his own motion bring it to the Collector’s notice that the
instrument is not duly stamped. In such cases, if the Collector is satisfied, that the omission to pay the
proper duty was due to accident, mistake or urgent necessity, he may receive the deficit amount and certify
by endorsement on the instrument that the proper duty has been levied.

In order to avail of the benefit of this section, the instrument must be produced before the Collector within 1
year of the date of its execution.

17. SOME IMPORTANT TERMS

Section 28 prescribes certain rules for apportionment of the consideration, in cases of
certain conveyances arising out of a property being contracted to be sold and thereafter
conveyed in parts etc.

Under Section 28(1) where a person contracts the sale of property as a whole and
Apportionment
thereafter conveys to the purchaser the property in separate parts, the consideration
[Section 28]
shall be apportioned in such manner as the parties think fit, provided that a distinct
consideration is set – forth for each separate part in the conveyance and thereafter the
conveyances shall be chargeable with ad valorem in respect of such distinct
consideration.
Section 16 provides that where the duty with which an instrument is chargeable, or its
exemption from duty, depends in any manner upon the duty actually paid in respect of
another instrument, the payment of such last mentioned duty, shall, if application is
Denoting Duty
made in writing to the Collector for that purpose, and on production of both the
[Section 16]
instruments, be denoted upon such first mentioned instrument, by endorsement under
the hand of the Collector of Stamps or in such other manner as the rules of the State
Government may provide.
E-Stamping is a computer based application and a secured way of paying Non Judicial
stamp duty to the Government. The prevailing system of physical stamp paper / franking
is being replaced by E-Stamping system. The benefits of e-Stamping are as under:
 e-Stamp Certificate can be generated within minutes;
E – Stamping  e-Stamp Certificate generated is tamper proof;
 e-Stamp Certificate generated has a Unique Identification Number;
 Easy accessibility and faster processing;
 Security;
 Cost savings and User friendly.

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