AMENDMENT TO THE INDIAN STAMP ACT, 1899
The Union Government notified Part I of Chapter IV of the Finance Act, 2019 ("Amendment") and promulgated the Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 ("Rules") which came into effect on 01 July, 2020.
Key highlights of the amendment
- The amendment has been carried out with respect to securities market transactions, with the main objective to facilitate ease of doing business and to bring in uniformity of the stamp duty applicable on issue and transfer of securities across the country.
- The amendment further streamlines the process of levying and collection of stamp duty on the instruments related to issue or transfer of securities, by all the States through common agencies i.e. stock exchanges or clearing corporations or depositories. This will in turn minimize cost of collection and enhance revenue productivity, and develop equity markets & equity culture across the country.
- The Indian Stamp Act, levies stamp duty on the instrument not on transactions and this fact has been upheld by many courts, since the Finance Act aims to levy stamp duty on securities issued, sold, transferred etc., through electronic means, therefore the issue of the matter was, what will be the instrument in such cases on which the stamp duty will be levied and collected.
- Prior to this Amendment, transfer of securities in dematerialization (“demat”) or electronic form was not subject to any stamp duty. However, the Amendment laid off the relaxations given to such transfer and has provided for levy and collection of stamp duty on transfer of securities in demat/electronic form as well. The said amendment seeks to end the biggest benefit available on dematerialization of any security.
Stamp Duty Rates w.e.f. 1st July 2020
Issue of Debenture 0.005%
Transfer and Re-issue of debenture 0.0001%.
Issue of security other than debenture 0.005%
Transfer of security other than debenture on delivery basis 0.015%
Transfer of security other than debenture on non-delivery basis 0.003%
(i) Futures (Equity and Commodity) 0.002%
(ii) Options (Equity and Commodity) 0.003%
(iii) Currency and Interest Rate Derivatives 0.0001%
(iv) Other Derivatives 0.002%
Government Securities 0%
Repo on Corporate Bonds 0.00001%
Recently, SEBI directed Alternative Investment Funds (‘AIFs’) and Registrars to an Issue & Share Transfer Agents (‘RTAs’) to comply with the Amendments and Rules made thereunder regarding collection of stamp duty on sale, transfer and issue of units of AIFs. Few of the AIFs have appointed RTAs to collect the amended stamp duty, however, some AIFs, who have still not appointed RTAs, needs to appoint RTA by July 15, 2020 to enable the collection of applicable stamp duty.