What is Stamp duty and What are the types of

Stamp duty?
Posted by: Srishti in All, Funding, General, Legal Ethics, Startups September 14, 2011 3 Comments

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What is Stamp duty and what are the types of stamp duty. Read further to
know more about it as Suchismita Bose in II Yr of Ram Manohar Lohiya
National Law University elaborates.

What is Stamp Duty?

Stamp duty means a tax payable on certain legal documents specified by statute; the
duty may be fixed or ad valorem meaning that the tax paid as a stamp duty may be a
fixed amount or an amount which varies based on the value of the products, services or
property on which it is levied. It is basically a kind of tax paid on any transaction based
on exchange of documents or execution of instruments.

Stamp Duty & Registry

What is the difference between a document

and an instrument?
A document is the record of the conditions agreed upon by the parties involved in a
transaction in a proper format. A document whose stamp duty has been paid or more

simply, a stamped document is considered an authentic and legal document. It gets

evidentiary value and can be admitted as evidence in Courts under the provisions of the
Indian Stamp Act, 1899. The Indian Stamp Act, 1899 is a fiscal statute dealing with tax
on transaction.
Instrument is a document by which a right or liability is created, transferred, extended,
limited, extinguished or recorded.

Coming to the subject of stamps used on these

documents, in India, two types of stamps are used:
Impressed stamp
Adhesive stamp
Impressed stamps can be:
1. Labels affixed and impressed by proper officer,
2. Stamps embossed or engraved on stamp paper, and
3. Impressions by franking machines generally done by the bank by depositing the
necessary amount of stamp duty with the banks.
Adhesive stamps can be:
Adhesive stamps are labels which can be conveniently stuck on the instruments.
Adhesive stamps can be further categorised into two categories: postal and non-postal
stamps. Postal stamps are used only for transaction with the post office and related
function whereas a non-postal stamp can be a court fee stamp, revenue stamp, notarial
stamp, special adhesive stamp, foreign bill stamp, brokers note, insurance policy stamp
or a share transfer stamp.
The most important aspect of the stamp duty is the calculation of the stamp duty. But
before the procedure of calculation itself, some basics need to be cleared.

On what kind of documents is a stamp duty

levied on?
Stamp Duty, in India, is generally levied on transfer of property, shares, debentures, bill
of exchange, conveyance deed, hire purchase, promissory note and movable and
immovable assets. It is also used for partnership deed, gift deed, lease agreement, rent
agreement, increase in authorized capital, agreement of sale, buying a house, bank
guarantee, commercial property, home loan, loan agreement, mortgage, and service

apartment. In real estate transaction that involves buying, selling, renting, and leasing
of a residential or commercial property, stamp duty of required value are paid before
signing it as the documents are not producible in a Court unless properly stamped.

Stamp Duty Calculator:

Usually it is easy enough to calculate the stamp duty payable as per the rates provided in
the Indian Stamp Act or the State Stamp Act and pay accordingly. But in complex cases,
the person paying the duty may not be able to ascertain the correct stamp duty and may
for help apply for the opinion of the Collector of Stamps.
First step to calculate the Stamp duty is to identify which category the document or
instrument falls under. There are three categories of transaction for the purpose of
stamp duty calculation:
Under the first category, the stamp duty remains fixed no matter what value is
mentioned in the document or instrument. Examples of such instruments are
Administration Bond, Affidavit, Adoption Deed, Appointment in Execution of Power,
Divorce, Apprenticeship Deed, Award, Article of Clerkship, Cancellation Deed,
Duplicate, Charter Party, Copy of Extracts, Indemnity Bond, Power of Attorney, etc.
Under the second category, Stamp duty charges are dependent upon the value
mentioned in the document. Such documents are Mortgage Deed, Lease Agreement,
Title Deeds, Security Bond, Hypothecation Deed, Article of Association, etc.
Under the third category, the Stamp duty depend either on the value mentioned in the
document or on the true market value, whichever is higher. Instruments like
Conveyance, Agreement for sale, Gift exchange, Partnership Deed, Development
Agreement, Transfer of Immovable Property, Trust Deed, Partition, and so on.

Stamp duty for property transactions:

Calculation of Stamp Duty Rates for property transactions:
The stamp duty rate varies from one kind of transaction and on the location of the
transaction. Every state in India follows a separate stamp duty rate structure. Usually
the duty levied is based on the current market value of the concerned property. The
rates are determined at the beginning of every year and made public through the stamp
duty ready reckon. The concept of e-stamping has now been introduced by the

government which is able to come up with a more accurate value of duty for immovable
property. Various popular parameters are taken into account by the e-stamping
procedure to calculate the rates of stamp duty in a particular region such as debt and
mortgage, distance from conveniences, approach roads, etc.

Revenue Stamp:
It is a tax of Re. 1 in the form of revenue stamp, which should be affixed on receipt for
any money or other property, the amount or value of which exceeds Rs. 5000.

Rate of stamp duty:

Stamp duty on non-residential properties whether in a co-operative society or not is at a
rate of 5% of the market value. Stamp duty on residential flats in a housing society and
building covered under Article 25(d) of Schedule of the Bombay Stamp Act, 1958
attracts concessional rates depending upon its market value as follows:
i. for up to Rs. 1,00,000 stamp duty is nil,
ii. between Rs. 1,00,001 to Rs, 2,50,000 it is 0.5% of the value,
iii. between Rs. 2,50,001 to Rs. 5,00,000 Stamp duty is Rs. 1,250 +3% of the value
above Rs. 2,50,000
iv. Above Rs. 5,00,000 it is Rs. 8,750 + 5% of the value above Rs. 5,00,000.