Amendments to the Indian Stamp Act 1899

The amendments to the Indian Stamp Act 1899 (Act) became effective on 1st July, 2020. They were initially recommended under the Finance Act 2019 and the Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 (Rules).
The intention behind the amendments is ease of conducting business and standardizing stamp duty payments. These amendments have introduced impactful changes to the preceding stamp duty regime. The amendments have affected not only stamp duty rates but also the process of levying and collecting stamp duty. The taxable event has technically changed from ‘execution of an instrument listed in the schedule’ to a ‘corporate action pertaining to a transaction’.

Key Amendments in definitions and important notes :

• “Instruments “- now instrument includes ‘a document, electronic or otherwise, created for a transaction in a stock exchange or depository by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded.’
• “Securities” – definition of securities is widened to include derivatives, a certificate of deposit, commercial usance bill, commercial paper, repo on corporate bonds
• “Allotment list” means a list containing details of allotment of the securities intimated by the issuer to the depository under subsection (2) of section 8 of the Depositories, Act, 1996;
• “Clearance list” means a list of transactions of sale and purchase relating to contracts traded on the stock exchanges submitted to a clearing corporation in accordance with the law for the time being in force in this behalf;
• “ Debentures” include, (i) debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not; (ii) bonds in the nature of debentures; (iii) certificate of deposit, commercial usance bill, commercial paper and such other debt instrument RBI may specify; (iv) securitised debt instruments; and (v) any other debt instruments specified by SEBI.
• “Market value”, in relation to an instrument through which—

(a) any security is traded in a stock exchange, means the price at which it is so traded;
(b) any security which is transferred through a depository but not traded in the stock exchange, means the price or the consideration mentioned in such instrument;
(c) any security is dealt otherwise than in the stock exchange or depository, means the price or consideration mentioned in such instrument;

• Prior to the amendment to the Act, only debentures being ‘marketable securities’ were liable to be stamped under Article 27 of Schedule I to the Act which deals with stamp duty on Debentures. The amended Article 27 omits the words “being a marketable security”. The Act therefore now seeks to levy stamp duty on issue of all types of debentures – marketable or otherwise.

• Now stamp duty for transfer of securities in dematerialized form

Prior to the amendment, by virtue of Section 8A of the Act, stamp duty was not payable on the transfer of shares in dematerialized form. This made transfer of shares in the dematerialized form an attractive proposition due to reduced costs. However, Section 8A of the Act has now been amended and stamp duty exemption available for transfer of shares in dematerialized form has been done away with.

• There are no significant changes made to how stamp duty is levied and collected in case of issuance and transfer of securities in physical form.

Revision in Stamp Duty Rates

Liable parties for payment and amount on which stamp duty is calculated