[Analysis] Draft Indian Stamp Bill – Stamp Duty Regulations | Definitions

Table of Contents

1. Clause 2(18): Inclusion of electronic Stamp in the definition of Impressed Stamp
2. Clause 2(19): Revised Definition: “India” excluding Jammu and Kashmir post Article 370
3. Clause 2(20): Expanded Definition: Inclusion of electronic records in the Definition of “Instrument”
4. Clause 2(23): Broadened Scope: Expansion of Lease definition to encompass diverse agreements
5. Clause 2(25): Revised Criteria: Amendment of “Market Value” definition for Property Transfers and Mining Leases
6. Clause 3: Exemption from Stamp Duty for SEZs and revised duty calculation for certain Instruments
7. Clause 4: Several instruments used in a single transaction
8. Clause 6: Increase in maximum Stamp Duty for counterpart or duplicate instruments
9. Clause 39: Clarification on Stamp Duty liability for Gift Deeds
10. Clause 40: Obligation to give Receipt in certain cases
11. Clause 41: Adjudication as to proper Stamp
12. Clause 50: Collector’s power to Stamp Instruments impounded
13. Clause 57: Power of payer to stamp Bills and Promissory Notes received unstamped
14. Clause 57A: Addressing Under-Valuation in various Instruments
15. Section 63: Allowance for Spoiled or Misused Stamps
16. Section 64: Allowance for Stamps Not Required for Use
17. Clause 72: Consolidating Stamp Duty Penalties: Introduction of General Penalty Provisions
18. Clause 81: Act to Be Translated and Sold Cheaply
19. Ommision of certain redundant provisions
20. Conclusion

The Indian Stamp Act, 1899, is a fiscal legislation that governs the levy of taxes in the form of stamps on instruments recording transactions. Stamp duties are levied by Central and State Governments. Stamp duty on certain specific documents falls under Entry 91 of the Union List, while others are subject to State stamp duties under Entry 66 of the Seventh Schedule of the Constitution. Some duties come under both State and Union purview under Entry 44 of the Concurrent list.

The Act has been amended from time to time to modernize stamp duty regulations, however, since it is a pre-constitution Act, therefore, certain provisions have become obsolete. Consequently, there is a proposal to repeal the old Act and to introduce a new legislation that aligns with current needs and objectives. In this regard, the Govt. has released the Draft Indian Stamp Bill, 2023 in the public domain to seek public comments.

The article aims to highlight key amendments, such as the inclusion of electronic stamps, expanded definitions, broader lease criteria, revised market value determinations, clarifications on stamp duty liabilities, and exemptions for Special Economic Zones. These changes reflect India’s commitment to modernising its stamp duty regime to meet the demands of today’s dynamic economic landscape.

1. Clause 2(18): Inclusion of electronic Stamp in the definition of Impressed Stamp

Proposed Change: Electronic stamp or e-stamp to be included in the definition of an impressed stamp. The term Electronic stamp or e-stamp is proposed to be defined to mean an electronically generated impression denoting the payment of stamp duty by electronic means or otherwise and includes digital/paperless e-stamp. Additionally, “such other impressions as the State Government may specify” is proposed to be included in the definition of Impressed Stamp.

Comments: This proposed change broadens the definition of an impressed stamp to include modern methods of payment and documentation through electronic means. It also grants the State Government the authority to specify other impressions that qualify as impressed stamps. This amendment aligns with the digitalization of documentation processes.

2. Clause 2(19): Revised Definition: “India” excluding Jammu and Kashmir post Article 370

Proposed Change: India to be defined to mean the whole of India, excluding the State of Jammu and Kashmir, in view of the abrogation of clauses (1) to (3) of Article 370 of the Constitution of India, which was upheld by the Supreme Court on 11-12-2023.

Comments: This amendment proposes to clarify the territorial scope of the Act in light of the significant constitutional change related to Jammu and Kashmir. It ensures consistency with the legal status of the region after the abrogation of Article 370.

3. Clause 2(20): Expanded Definition: Inclusion of electronic records in the Definition of “Instrument”

Proposed Change: Instrument to be defined to include any electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000.

Comments: This change aims to broaden the definition of an instrument to encompass electronic records as defined in the Information Technology Act, 2000. It reflects the modernization of document types, recognizing the prevalence of electronic records in legal transactions.

4. Clause 2(23): Broadened Scope: Expansion of Lease definition to encompass diverse agreements

Proposed Change: The definition of a lease is proposed to be expanded to include various agreements, such as any agreement to lease, any mining license or mining lease, and any leave and license agreement.

Comments: This amendment aims to broaden the scope of what constitutes a lease under the Act. It acknowledges various forms of lease agreements, including those related to mining and leave and license arrangements.

5. Clause 2(25): Revised Criteria: Amendment of “Market Value” definition for Property Transfers and Mining Leases

Proposed Change: The definition of “market value” is proposed to be amended to include the determination of market value concerning instruments related to the transfer of property rights and mining lease grants or renewals.

Comments: This amendment seeks to provide clarity on how to determine the market value for instruments involving property transfers and mining leases. It specifies the application of market value calculation in these contexts.

6. Clause 3: Exemption from Stamp Duty for SEZs and revised duty calculation for certain Instruments

Proposed Change: No stamp duty shall be chargeable for instruments executed by or on behalf of or in favour of the Developer or Unit in connection with the purposes of the Special Economic Zone. The exemption from duty for instruments related to ships or vessels registered under specific acts is proposed to be withdrawn. The proper duty on certain instruments shall be calculated as a percentage of the market value.

Comments: These proposed amendment aims to outline exemptions and calculation methods for stamp duty in specific scenarios, including instruments related to Special Economic Zones and ships or vessels. It also emphasizes the calculation of duty based on market value for particular instruments.

7. Clause 4: Several instruments used in a single transaction

Proposed Change: Section 4 shall also apply when several instruments are used in a single transaction of gift or lease.

Comments: Section 4 of the Indian Stamp Act, 1899 provides that where, in the case of any sale, mortgage or settlement, several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with the duty prescribed in Schedule I, for the conveyance, mortgage or settlement, and each of the other instruments shall be chargeable with a duty of one rupee instead of the duty (if any) prescribed for it in that Schedule.

The amendment proposes to extend the applicability of Section 4 to cover situations where several instruments are used in a single transaction of gift or lease, in addition to sale, mortgage, and settlement.

8. Clause 6: Increase in maximum Stamp Duty for counterpart or duplicate instruments

Proposed Change: The maximum stamp duty chargeable is proposed to be increased from Rs.1 to Rs.100 on the counterpart or duplicate of any instrument chargeable with duty for which the proper duty has been paid.

Comments: This amendment proposes to increase the maximum stamp duty chargeable for counterparts or duplicates of instruments to Rs.100, providing flexibility in stamp duty rates.

9. Clause 39: Clarification on Stamp Duty liability for Gift Deeds

Proposed Change: In the case of debentures and gift deeds, it is proposed to clarify that stamp duty shall be payable by the person drawing, making, or executing such instruments.

Comments: This amendment clarifies the responsibility for paying stamp duty on debentures and gift deeds, ensuring that it falls upon the appropriate party involved in the transaction.

10. Clause 40: Obligation to give Receipt in certain cases

Proposed Change: The monetary threshold for issuing revenue-stamped receipts for receipt of money, bills, cheques, notes, or property on the demand of the person paying or delivering is proposed to be increased from Rs.20 to Rs.1000.

Comments: This proposed change raises the monetary threshold for issuing revenue-stamped receipts, aligning it with inflation and modern financial practices.

11. Clause 41: Adjudication as to proper Stamp

Proposed Change: Application fees for application to the Collector to have stamp duty determined are proposed to be increased from a maximum fee of Rs.5 to a maximum fee of Rs.1000.

Comments: This amendment increases the application fees for seeking adjudication on the proper stamp duty, potentially reflecting increased administrative costs.

12. Clause 50: Collector’s power to Stamp Instruments impounded

Proposed Change: The monetary limit in respect of the Collector’s power to stamp instruments not stamped on which a petty amount of duty is payable is proposed to be increased from 10 naya paise to Rs.10.

Comments: This amendment raises the monetary limit for the Collector’s authority to stamp instruments that were not appropriately stamped but involve a small amount of duty, reflecting changes in monetary values over time.

13. Clause 57: Power of payer to stamp Bills and Promissory Notes received unstamped

Proposed Change: The limit for the payer to stamp bills and promissory notes received unstamped is proposed to be increased from 10 naya paise to Rs.10.

Comments: This amendment raises the limit for individuals to self-stamp bills and promissory notes received unstamped, adapting to changes in economic conditions.

14. Clause 57A: Addressing Under-Valuation in various Instruments

Proposed Change: Section 57A’s scope is proposed to be expanded to apply to any instrument of conveyance, exchange, gift, partition, or settlement. The time limit of 3 years for Collector’s suo motu inquiry into under-valuation is proposed to be removed. Appeals against the Collector’s orders will lie with the Chief Controlling Revenue Authority.

Comments: These proposed changes extend the applicability of Section 57A, remove the time limit for the Collector’s inquiry, and clarify the appeal process for cases of under-valuation of instruments. This amendment seeks to enhance oversight and enforcement in cases of potential under-valuation across a wider spectrum of instruments while streamlining the appeals process.

15. Section 63: Allowance for Spoiled or Misused Stamps

Proposed Change: The allowance for spoiled or misused stamps is proposed to be increased to ten naya paise for each rupee or fraction of a rupee, replacing the previous deduction method.

Comments: This amendment proposes to modify the method for calculating allowances for spoiled or misused stamps, providing a fixed allowance for each rupee or fraction, simplifying the process. This change aims to simplify and improve the compensation process for spoiled or misused stamps, ensuring a fair and standardized approach.

16. Section 64: Allowance for Stamps Not Required for Use

Proposed Change: The allowance for stamps not required for use is proposed to be changed to ten rupees for each hundred rupees, replacing the previous deduction method.

Comments: This change alters the method for calculating allowances for unused stamps, providing a fixed allowance for each hundred rupees, simplifying the calculation process.

17. Clause 72: Consolidating Stamp Duty Penalties: Introduction of General Penalty Provisions

Proposed Change: Sections 62 to 68, which provide for penalties ranging from Rs.100 to Rs.5000 for different violations regarding stamping of documents, are proposed to be omitted. A general penalty under Section 72 is proposed, which may extend to 25 thousand rupees and, in case of a continuing contravention, a penalty of up to rupees 1000 per day. It is proposed that this general penalty will apply to any violation of the law regarding stamping. No penalty shall be imposed without giving an opportunity of hearing to the party concerned.

Comments: These proposed changes consolidate and simplify the penalty provisions in the Act, introducing a general penalty while ensuring due process through an opportunity for a hearing.

18. Clause 81: Act to Be Translated and Sold Cheaply

Proposed Change: The maximum price at which the State Government may sell cheap translations of the Act is proposed to be increased from twenty-five naye paise per copy to Rs.100 per copy.

Comments: This amendment raises the maximum price for selling cheap translations of the Act, aligning it with inflation and increased production costs.

19. Ommision of certain redundant provisions

19.1 Section 54A of the: Allowances for Denomination of Stamps in Annas

Proposed Change: Section 54A is proposed to be omitted as it is redundant.

19.2 Section 54B: Allowances for Refugee Relief Stamps

Proposed Change: Section 54B is proposed to be omitted as it is redundant.

19.3 Section 77A and 77B: Fractions of Five Naye Paise to Be Rounded Off, Saving as to Certain Stamps

Proposed Change: Sections 77A and 77B are proposed to be omitted as they are redundant.

Comments: This amendment removes Section 54A, Section 54B, Sections 77A and 77B which are considered redundant, from the Act.

19.4 Sections 70, 71, and 72: Institution and Conduct of Prosecutions, Jurisdiction of Magistrate, Place of Trial

Proposed Change: Sections 70, 71, and 72 are proposed to be omitted to make stamping violations a civil matter subject to penalties only.

Comments: These amendments remove provisions related to criminal prosecutions for stamping violations, making such violations a civil matter subject to penalties instead.

20. Conclusion

The proposed amendments to the Indian Stamp Act, 1899, represent a significant step towards modernizing and streamlining India’s stamp duty regime. These changes address various aspects, from e-stamps and expanded definitions to market value determinations and penalty provisions. The removal of redundant provisions further simplifies the legal framework. Overall, these amendments aim to enhance efficiency, fairness, and compliance within the stamp duty system, ultimately benefiting both the government and stakeholders in transactions.