Stamp duty on issue of share certificates

BACKROUND:

As per Section 3 of Indian Stamps Act 1899, Every Share Certificate must bear the necessary stamp duty as per the Stamp Act of the respective State/ Union Territory from which Certificate is issued. The rates of stamp duty can be obtained with reference to relevant article of given State Act.

According to Companies Act, 2013,- “Every person whose name is entered as a member in the register of members shall be entitled to receive share certificate within two months after allotment (or within such other period as the conditions of issue shall provide).”

According to Indian Stamp Act, 1899, the company shall pay the stamp duty within thirty days after the Issue of Share Certificate.

i. The Share certificate must bear stamp duty as per State Stamp act. Stamp duty can be paid by putting adhesive stamps and cancelling the same. In case of issue of large number of shares, stamp duty can be paid in lump sum and this fact should be mentioned on the share certificates.

ii. In such cases, putting adhesive stamp on each share certificate is not necessary. Stamp duty is payable even if security is issued in dematerialized form.

a. Stamp duty is payable on issue price and not on the value of security.

b. Stamp duty on share certificate is State subject, but Stamp Duty on Debenture Certificate is a Union Subject.

Issue of Share Certificate from other State:

i. Stamp duty payable on share certificate is lower in some states than other. It is ‘higher in Maharashtra’ and probably ‘Lowest in Delhi’.

ii. Some companies having registered office in Maharashtra ‘Issue’ shares from other state by holding Board Meeting in that State.

iii. BUT Companies Act nowhere specifies that share Certificates must be ‘ Issued’ from “Registered Office only”. So now companies have to pay Duty on issue of Share Certificate as per State where Registered Office of company is situated.

Stamp Duty on Issue of Duplicate Share Certificate:

One issue is whether stamp duty is payable again when a duplicate or split share certificate is issued. Section 3(a) of Indian Stamp Act states that every instrument mentioned in the Schedule I of Indian Stamp Act which, not having been previously executed by any person, is executed in India; shall be chargeable with stamp duty of the amount indicated in Schedule I.

As per Delhi Stamp act, stamp duty shall be paid on “CERTIFICATE OR OTHER DOCUMENT evidence the right or title of the holder thereof, or any other person,   either to any shares, one thousand stock in or of any incorporated Co. or other body corporate or to become proprietor of shares, scrip or stock in or of any such Company or body.”

Rate of the said stamp duty in Delhi shall be “One rupee for every one thousand, or a part thereof, of the value of the shares, scrip or stock including the amount of PREMIUM”.

Penalty shall be 1 to 10 times depending upon the order being passed by department. However penalty can be lower than 1 time as decided by authority.

PROCEDURE FOR SUBMISSION OF STAMP DUTY IN DELHI:

A. First Company will Allot Shares.

B. Company will is issue Share Certificates within 60 days of Allotment of Shares.

C. PREPARE DOCUMENTS:

After issue of shares, Stamp duty shall be paid to the exchequer of government within 30 (Thirty) days from issue of Share Certificates. Following documents shall be prepared:

A) Covering Letter (duly affixed Rs 10/- Court Fee Stamp).

B) List of Existing directors.

C) List of shareholders.

D) Original Share Certificate

E) Certified Copy of Form-2/ PAS-3 with Challan.

F) Certified Copy of Memorandum & Article of Association.

G) Rs 10/- as adjudication fee to be deposited with cashier of the department.

D. SUBMISSION OF DOCUMENTS:

At the time of issue of shares, Stamp duty shall be paid to the exchequer of government within specified period. Above discussed documents shall be prepared & submitted to Revenue Department (For Delhi Address is: 204, B – Block, 5, Sham Nath Marg, Delhi -110054) within 30 days of Issue of Share Certificates.

E. PREPARATION OF DUTY CHART:

i. Duty Chart is prepared by the department nearly about 15 to 20 days after submission of documents.

ii. Duty Chart includes Name of the Company, Address of the Company, Face Value of Shares issued, Premium Charged on Shares, Date of Issue, etc.

F. PREPARATION OF CHALLAN:

i. Challan has been issued by department in Triplicate on the basis of Duty Chart Made.

ii. The same Challan has to be paid at Specified Bank (List of Bank will be provide by Department) within 5-6 working days for smooth working of your file/case

G. PAYMENT OF CHALLAN:

After the preparation of Challan (in triplicate), you have to make payment of Challan (in triplicate) in Specified Banks within 5 – 6 Working Days, recommended.

H. DEPOSIT OF CHALLAN:

i.  After submission of challan, we have to deposit a copy of challan with the revenue department.

ii. After verification of challan (after 20 days of depositing of challan), department issue a certificate of Stamp duty paid (1 day to 100 days).

STAMP DUTY NOT PAID WITHIN 30 DAYS OF ISSUE OF CERTIFICATE

The procedure is same as procedure for submission of Stamp Duty  on time(as discussed in previous point) but the only difference is that we have to pay penalty i.e. 1 to 10 times depending upon the order being passed by department.

A notice is being sent by department to the Company if it fails to pay the Stamp duty within Time Limits.

FAQ’S