Stamp Duty, Stamp Duty, Stamp Duty, say it thrice and get it right. It is an essential, nay, crucial aspect of finalizing any legal transaction. This duty is a tax levied by the Government on every legal transaction. It is necessary to render an instrument or document legitimate and give it evidentiary value i.e. for it to be admissible in court. Furthermore, any delay in paying this duty can result in a penalty of up to a maximum of 200% of the deficit amount of stamp duty.
Stamp duty, as the name suggests, is a tax levied in the form of stamps on instruments and documents that record transactions. It is a part of the Union List as entry 91 (viz. Bills of Exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts), the State List as entry 63 (rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty) and the Concurrent list as entry 44 (stamp duty other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty).
The Indian Stamp Act, 1899, currently governs stamp duty in all the States which do not have their own Stamp Act, but each state can prescribe its own rate of stamp duty, and so it varies in each State. This tax/duty is collected and kept by the concerned States.
Stamp Duty in Tamil Nadu
The State of Tamil Nadu is in the process of getting its own Stamp Act, following other states like Maharashtra, Gujarat, Kerala, Karnataka and Rajasthan. The Tamil Nadu Stamp Bill, 2013, is the proposed bill which has been passed by the Tamil Nadu State Legislative Assembly, its enactment is subject to the President’s assent (stamp duty is a part of the concurrent list, whereby the President’s assent is essential). Pending the Bill’s enactment, the Indian Stamp Act, 1899, as amended in 2013 applies.
Determining Stamp Duty
The amount of stamp duty levied depends on the kind of instrument/document in question. Before proceeding to Stamp Duty, we must be certain of the type of document or instrument we have.
A document is a record of the conditions agreed upon by the parties involved in the transaction in a proper established format. An instrument, on the other hand, is any document by which any right or liability is, or purports to be, created, transferred, limited, extended extinguished or recorded.
Stamp duty is to be paid on the documents and instruments, not on the transactions themselves. It can be paid by either party to the transaction or as agreed between them to the terms and conditions.
The stamp duty can broadly be divided into three categories. The first in which the duty for certain documents/instruments is fixed (as prescribed), irrespective of the value mentioned therein, for example, Affidavits of declaration. The second where the duty varies depending upon the value mentioned in the document, and the third category, wherein stamp duty levied is based on the market value of a property. The valuation of the property is essential to determine the stamp duty in certain cases, eg. transfer of property etc. It may be noted that a Will is the only instrument of transferring property which does not attract stamp duty.
Please refer to Schedule I for Stamp Duty on Instruments. For property transactions, the Guideline Value of the property must be ascertained first, and based on this value, the Stamp Duty and Registration Fee are levied. You can get these details on Tamil Nadu’s Registration department website. In addition, there are special counters at the Sub Registrar’s offices to respond to queries.
Be sure to have your property valued correctly and pay the exact amount of duty at the right time. A small mistake here may cost you big in the long run, as they say, a stitch in time saves nine.
Stamp Duty and Tax Deduction
Stamp duty, registration charges and other expenses are directly related to transfer of property. Therefore, the purchase and construction of a house property can be claimed as tax deductions under Section 80C of the Income Tax Act, 1961, but Sec 80C caps off the maximum amount allowed to be deductible at Rs 1,50,000/-.
Paying Stamp Duty
Stamp Duty is payable by way of stamps, as the name suggests. There are different kinds of stamps by way of which one can pay stamp duty.
- An impressed duty stamp is created by impressing or embossing a stamp onto a document using a metal die to show that the requisite duty has been paid. This stamp/label has to be impressed upon a paper by an authorized person. The regular stamp paper we get is included here.
- The impression of Stamp by Franking Machines is generally done by Banks. One must deposit the necessary stamp duty with the Bank itself.
- Adhesive stamps are labels that can be conveniently stuck on instruments and documents. They are available in the postal and non-postal varieties. Postal stamps as we all know, are used for postal transactions, whereas, non-postal stamps may be – court fees stamps, revenue stamps, foreign bill stamps, broker’s notes, insurance policy stamps and share transfer stamps.
A 1 rupee revenue stamp must be affixed on a receipt for money or property of value more than Rs.5,000.
- E- stamping is the latest and most convenient means of paying stamp duty. It was started by the Government to combat counterfeit stamp papers which had flooded the market. The Stock Holding Corporation of India Limited (SHCIL) is in charge of issuing e-stamps in India. An e-stamp can be bought from an authorized SHCIL outlet or a Bank near you which issues e-stamps.
Choosing Your Stamp
The trouble with physical stamps/stamp papers is that, at times, stamp vendors do not stock stamp papers of higher value. In order to procure the same, people risk going to counterfeit stamp vendors, this ultimately nullifies the authenticity of your document/instrument. Some vendors even charge an extra amount, over and above the stamp duty, exploiting the necessity of people. Such vendors are liable for criminal prosecution under the India Stamp Act, 1899, in addition to having their licence cancelled. If someone tries to overcharge you, it is imperative that you inform the Registration Department.
You are, therefore, requested to purchase your stamp paper only from the licensed stamp vendors or pay duty by way of e-stamping from the zones listed here. The Sub-Registrars, Treasuries and Assistant Superintendent of Stamps, Chennai also sell Stamp Papers. You can also obtain Stamp Papers through LegalDesk.com. If you are required to create a legal document, you can create it online with LegalDesk.com and opt home-delivery of the same, in which, the document will be printed on Stamp Paper and delivered to your doorstep. In case you have already got your document drafted, then you can choose our Print n Deliver with Stamp Paper service in which your draft will be printed on Stamp Paper and delivered to you.
Cash, D.D. and Treasury Challan as Stamp Duty
In the case of a real scarcity or unavailability of stamps, the Tamil Nadu State offers one the option of paying stamp duty by way of Cash or D.D or Treasury Challan. The instrument may be written on a plain paper and presented for registration. The Sub Registrar will collect stamp duty in cash/D.D. and will add a certificate to that effect and register the same. The D.D. should be drawn in favor of the Sub Registrar concerned.
To create any document, please check our list of ready to use, online legal documents or click the button below and submit a request and our support team will soon come up with a custom draft suiting your requirements. If you have any queries with regard to stamp duty payment, please feel free to write to us. Happy Stamping!