Stamp Duty on Securities: A Comprehensive Guide for Companies

Contributed By: Karishma Mantri
karishma@simplybiz.in

Stamp duty is a tax on certain transactions, granting them legal recognition. Under the Companies Act, 2013 and the Indian Stamp Act, 1899, it applies to corporate actions such as the issue, transfer, or allotment of securities, and must be paid before executing or registering the relevant instrument, in accordance with state laws.

Stamp duty is a State/ Central subject in India, meaning that each state has the authority to determine its own rates and regulations for many matters. Vide 91 of the Union List, the Central Government is empowered to collect stamp duty on transfer forms for transfer of shares, debentures and State governments do not have the power to enact any laws for payment of stamp duty in respect to these instruments.

Historically, stamp duty rates on securities varied significantly across states, resulting in differing liabilities for similar transactions. To address this disparity, the Finance Act, 2019 introduced amendments to centralize and standardize stamp duty on securities. These were implemented through related rules and Notification No. S.O. 4419(E) dated 10 December 2019, and became effective from 1 July 2020.

The following table reflects the uniform stamp duty rates applicable from July 1, 2020, as specified in Schedule I of the Indian Stamp Act, 1899:

Payment Mechanism for Stamp Duty on Securities

For listed companies and for unlisted public and private companies (other than a Small Company or One Person Company), where obtaining an ISIN and establishing electronic connectivity with a depository is mandatory, the stamp duty on the issuance and transfer of securities is collected and remitted through the depositories.

However, in the case of Small and One Person companies whose securities do not have such electronic connectivity, practical challenges arise in remitting the applicable stamp duty—particularly where the mode, authority, and platform for payment are not clearly prescribed or uniformly implemented across states.

For such companies, the responsibility of stamp duty payment does not lie with the depositories, and they must make the payment directly through the available avenues. The below-mentioned methods outline the options accessible to these companies.

• From Traditional to Digital

Traditional methods like stamp paper and franking are still used, but state-specific limits on the value that can be stamped in a single instrument often make them impractical for high-value securities transactions. Earlier, companies relied on these manual processes, which were time-consuming and required physical handling of documents—prompting a shift towards faster, digital options like e-stamping through Stock Holding Corporation of India Ltd (SHCIL), Authorized RTA and state portals.

• Multiple Payment Avenues
  There are multiple methods available for paying stamp duty on securities, and below are some of the most widely used.

1. State e-Stamp Portals – State-run platforms for paying stamp duty online. Some states, like Telangana, Maharashtra etc. operate their own e-stamping portals where users can generate e-stamp certificates after making the payment. The process generally involves selecting the instrument type, entering transaction details, paying through net banking or other digital modes, and downloading the e-stamp certificate, which serves as valid proof of payment.

The following steps outline the process for paying stamp duty in Telangana through the above-mentioned platform:

• Log in to telangana.gov.in (for state of Telangana) or the respective state portal
• Create login credentials and use them to access the portal.
• Access the E-Stamp service under the tab of online services
• Click on non-registration e- challan tab and fill the requisite details of remitter and issuer
• Fill remitter and issuer details, register, and proceed to online payment.
• Once the payment is made, the receipt is generated, which serves as sufficient proof of stamp duty payment.
• The receipt may need to be submitted to the DRO Office for endorsement on the certificate, depending on state-specific requirements.

2. SHCIL e-Stamping – is a government-owned company and the Central Record Keeping Agency (CRA) appointed to manage and facilitate e-stamping services across various states and union territories. It enables electronic payment of stamp duty through its online platform.

Note: SHCIL e-stamping is not available in all states—users must verify availability by checking the state list in the platform’s drop-down menu before initiating payment.

The following steps outlines making payment through the above mentioned platform:

• Visit the official SHCIL e-Stamping website – https://www.shcilestamp.com.

• Login with the credentials and select the State from the drop-down menu where the document is to be stamped.
• Click on E-Stamp Services or E-Stamping
• Choose Make Payment / Generate Challan (Online/offline payment option).
• Fill in the required details such as document type, party details, and stamp duty amount.
• Select Payment Mode – Net Banking, Debit Card, or other available options.
• Complete the payment process as per your bank’s instructions.
• Once payment is successful, generate and download the Acknowledgment.
• Collect or download the E-Stamp Certificate from SHCIL’s portal.

3. Authorized RTAs – Vide Gazette Notification S.O. 116(E) dated 8 January 2020, the Central Government notified SEBI-registered Registrars to an Issue and/or Share Transfer Agents (RTAs) as “depositories” for the limited purpose of acting as collecting agents under the Indian Stamp Act, 1899, in cases where transactions are carried out otherwise than through a recognized stock exchange or depository. The implementation of the amended provisions under the Finance Act, 2019 was made effective from 1 July 2020 vide notification dated 30 March 2020.

Conclusion: The standardization of stamp duty rates have simplified compliance for securities transactions across India. While depositories and authorized RTAs streamline collection for most entities, companies without electronic connectivity must rely on franking, state portals, SHCIL or other prescribed methods. By selecting the appropriate payment avenue—whether traditional or digital, companies can ensure timely and compliant stamp duty payments, thereby safeguarding the legal validity of their transactions.

If you are looking for professional assistance in share issuance, share transfers, stamp duty payments, fundraising transactions or end-to-end compliance management for your company, SimplyBiz offers comprehensive solutions covering all stages of the entity life cycle. To know more or to outsource your compliance requirements, please write to Shilpa Agarwal at shilpa@simplybiz.in.