The requirement of payment of Stamp Duty arises at the time of issuance of Share certificates. The jurisdiction to determine the stamp duty on the issuance of Share certificates lies with the State. Therefore, stamp duty rates on issuance of Share certificates vary from state to state.
Eg: In Delhi the rate of stamp duty is Re. 1/- for every Rs. 1000 or part thereof of the value of the shares or stocks including the amount of premium whereas in Uttar Pradesh the rate of stamp duty is Re. 1/- for each folio irrespective of the consideration involved.
Here we have tried answering some of the commonly asked questions:
What is Stamp Duty?
Stamp duty is the amount of duty levied on certain documents or instruments to be paid to the state or central government to make it legally recognised.
What is Share Certificate?
A share certificate is a printed signed document that depicts legal proof of ownership of the number of shares specified in that certificate. The Companies Act, 2013 has prescribed the events along with time-period within which company have to issue share certificates.
Timeline to Issue Share Certificates by Unlisted companies & Payment of Stamp Duty thereon
Initially, as per the Companies Act, 2013, Share certificates in form SH-1 can be issued to the subscribers within 60 days of the incorporation and stamping of such share certificates to be ensured within 30 days of such issuance.
Thereafter, in the event of subsequent allotments also, Share certificates are to be issued within 60 days of such allotment and stamping of such share certificates to be ensured within 30 days of such issuance.
Where to pay the Stamp Duty
Stamp duty shall be paid where the registered office of the company is established.
What is the mode to pay Stamp Duty
Since payment of Stamp duty on issuance of share certificates is a state subject, therefore, mode of paying the stamp duty also varies from state to state. In some states you can pay the amount online via SHCIL e-stamp website link, at some states it is offline and in some states, you can buy stamp paper or get the franking done from the Registrar’s office.
Penalty for non-payment of Stamp Duty
In case of non-payment of stamp duty or evasion of payment of stamp duty on the issue of share certificate and in case of allotment of share within the prescribed time limit of 30 days, then, the company shall be liable for heavy penalty under the Act, which may extend to 10 times of the duty.
Also, the Company shall attend a hearing on the date that would be given by the concerned department/authority.
Stamp duty on issue of shares in Demat form
Issue оf seсurities in DEMAT Mode, the stаmр-duty оn the аllоtment list shаll be соlleсted оn behаlf оf the Stаte Gоvernment by the Deроsitоry.
Stamp duty on transfer of shares
The stamp duty payable on transfer of shares in physical form shall be 0.015% of the total market value of the shares. Market Value means Price /consideration mentioned in the particular instrument i.e. SH-4 Share Transfer Deed.
Transfer of Shares in Demat form through Stock exchange – When the sаle оf аny seсurities, whether delivery bаsed оr оtherwise, is mаde thrоugh а stосk exсhаnge, the stаmр-duty оn eасh suсh sаle shаll be соlleсted оn behаlf оf the Stаte Gоvernment by the stосk exсhаnge оr а сleаring соrроrаtiоn аuthоrized by it.
Transfer of Shares in Demat form through Depository – When аny trаnsfer оf seсurities fоr а соnsiderаtiоn, whether delivery bаsed оr оtherwise, is mаde through а deроsitоry, the stаmр-duty оn suсh trаnsfer shаll be соlleсted оn behаlf оf the Stаte Gоvernment by the deроsitоry.
The Share Certificates are not valid or hold evidentiary value unless the stamp duty is paid on the same and the certificate carries the stamps (in case of offline payment) or the reference towards the payment of stamp duty (in case of online payment). The stamp duty is to be paid as per the rates prescribed under the respective State Stamp Act of the state where the registered office of the company is situated.
The content of this document has been developed based on relevant information and are purely for private circulation. Though the authors have made utmost efforts to provide authentic information, however, the authors expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and consequences of anything done or omitted to be done by any such person in reliance upon the contents of this document.