A Stamp duty is imposed on the legal papers necessary to have a transaction validated, for example, when selling shares and transferring properties. This is an integral source of revenue for all UTs and states to carry out documentation and ascertain legitimacy over financial oppressions. In terms of share certificates, this entails ownership over the company; hence, their genuineness is paramount evidence. With respect to this, stamp duty payments would be evidence of their legality. Not paying stamp duty includes a financial risk along with other penalties. This article goes into the details of stamp duty related to share certificates in different states and UTs.
What is Stamp Duty on Share Certificates?
Stamp duty is a stamp charge that a person has to pay to the government when purchasing or transferring a share certificate. It is evidence of ownership to a company. Such a levy is one such statutory law provided in the India Stamp Act, 1899 also there are multiple stamp duty rates which have been set by the respective UTs as well as state the companies or businesses are being formed.
You can take a share of ownership in the company by purchasing shares of that company. These shares are represented through the official document called share certificates. But your share certificate requires legal validation in order to get ownership and shareholder rights. You can legally prove your ownership by paying the stamp duty. It helps your document get legal authenticity and be authenticated by the courts. It ensures security of investment and prevents fraud against your shares.
Important Aspects of Stamp Duty on Share Certificate
Compliance stamp duty is levied when a company issues new share certificates to its shareholders and when shares are transferred from one shareholder to another. Some of the noticeable things which you must know in reference to stamp duty on share certificates are given below:
Purpose
Stamp duty is levied with a purpose, it's not just a legal formality, but also, it's more than that. The duty ensures that the transaction is valid, hence legal recognition to the share certificate has been provided through this. Also it becomes documented legally through this and if necessary such documents can be proved easily in the court because their evidentiary value is high.
Calculation
Before paying the stamp duty for the share certificate you need to calculate it. The calculation will be done in multiple ways as per the place of registration. In some states, it is a fixed amount per certificate. And in some states, it is assessed as a percentage of the value of shares along with premium paid. Hence before calculating the stamp duty for share certificate one needs to go through the rules and regulations with respect to stamp duty of the place for which share certificate is issued.
Mode of Payment
There are multiple ways through which you can pay stamp duty for your share certificate in India. Stamp duty can be paid through adhesive stamps, franking and e-stamping. Depending upon the provisions of the respective place mode of the payment may be different or one out of them.
Stamp Duty Payment Schedule of Share Certificate
As per Indian Stamp Act, they should have paid the stamp duty under the prescribed time limit, that is 30 days from the issuance of a share certificate or date of transfer. Indian Stamp Act is applicable in all States and UTs. They suffer penalties and multiple legal issues for the above period not noticed by the firm with respect to the Stamp Act.
Importance of Paying Stamp Duty on Share Certificates
Due to the following reasons it's important to pay stamp duty on the share certificate in India:
- Legal Validity: Share certificates are documents that confirm your ownership of shares in a company. Properly stamped certificates ensure their validity and enforceability in disputes or legal proceedings.
- Compliance with the Law: Failure to pay or pay stamp duty inadequately is against the Indian Stamp Act, and this may attract penalty and other legal consequences.
- Smooth Transactions: Properly stamped certificates ensure smooth future transfer or sale of shares. Delays or lack of proper stamp duty may complicate future transactions and attract many supplementary costs.
- Shareholders Right: If stamp duty is paid legally, shareholders' interest and rights are protected. Thereby, the shareholding system in the corporation would be fair and open.
UT and State Wise Stamp Duty for Share Certificate in India
As discussed above, there will be different stamp duty for share certificates for different states. You can refer the content given below in order to understand the same:
For States
- Andhra Pradesh : Rs 0.30/- stamp for each certificates
- Arunachal Pradesh: Rs 5.00 stamp per each certificate.
- Assam: ₹5.00 per certificate.
- Bihar: ₹10.00 per certificate.
- Chhattisgarh: ₹10.00 per certificate.
- Goa: ₹10.00 per certificate.
- Gujarat: ₹1.00 for each ₹1,000 thereof of the value of shares.
- Haryana: ₹0.40 per certificate; or a revenue stamp of ₹1.00 may be affixed
- Himachal Pradesh: ₹0.40 per certificate; or a revenue stamp of ₹1.00 may be affixed.
- Jammu & Kashmir (J&K): ₹1.00 for every ₹1,000 or part thereof of the value of shares.
- Jharkhand: ₹1.00 for each certificate.
- Karnataka: ₹1.00 for every ₹1,000 or part thereof of the value of shares.
- Kerala: ₹1.00 for every ₹1,000 or part thereof of the value of shares.
- Madhya Pradesh: ₹1.00 for every ₹1,000 or part thereof of the value of shares.
- Maharashtra: 0.1% of the value of shares (₹1.00 for every ₹1,000).
- Manipur: ₹5.00 for each certificate.
- Meghalaya: ₹2.00 for each certificate.
- Mizoram: ₹1.00 for every ₹1,000 or part thereof of the value of shares
- Nagaland: ₹0.45 for every ₹1,000 or part thereof of the value of shares
- Odisha (Orissa): ₹1.00 for each certificate.
- Punjab: ₹10.00 for each certificate.
- Rajasthan: ₹1.00 for every ₹1,000 or part there of value of shares,
- Tamil Nadu: ₹1.00 for each ₹1,000 or part thereof of the value of shares,
- Telangana: ₹10.00 for every certificate.
- Tripura: ₹5.00 for each certificate.
- Uttar Pradesh: ₹1.00 for each certificate.
- Uttarakhand: ₹1.00 for every certificate.
- West Bengal: ₹0.60 for each certificate.
Union Territories:
- Chandigarh: ₹0.40 for each certificate.
- Dadra and Nagar Haveli: ₹1.00 for every ₹1,000 or part thereof of the value of shares,
- Daman and Diu: ₹10.00 for each certificate
- National Capital Territory of Delhi i.e NCT of Delhi: ₹1.00 for every ₹1,000 or part thereof of the value of shares,
Conclusion
Stamp duty rates for share certificates vary in the different states and UTs across India. While there are certain states, which have a fixed amount of rupees payable per certificate, other states are assessed as a percent of the shares value besides any premium attached to such shares. For example, Andhra Pradesh and Haryana pay lower fixed charges, and in Maharashtra and Gujarat the rates are calculated by percentage per the value of the share. Hence it is very important to check the stamp duty of the share certificate before its registration. Place of registration and place of incorporation of the company plays a very crucial role in the calculation of the stamp duty.
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