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Stamp Duty on Shares in Demat

Maya (ABC) (24 Points)

13 October 2009

I am charged Stamp duty on shares bought and sold.

I thought stamp duty was charged only on transfer of physical share certificates and not on shares held in electronic form. Can someone please help me in understanding as to from when stamp duty has become applicable on electronical transfer - that too on buy and sale of shares?

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4 Replies

CS Diwaker Agrawal (COMPANY SECRETARY) (167 Points)
Replied 16 October 2009

in my view, in case of demat share, stamp duty is imposed only for issuance of broker note.

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 17 October 2009

its no where written in the law that stamp duty is not charged on electronic transfer of shares.

the fact is that stamp duty is applicable on transfer of shares. it includes both, physical andd electronic.

in case of physical share transfer, the stamp duty is paid as agreed between the parties. however, in case of the electronic transfer, the broker has to pay consolidated stamp duty on a periodical basis and in return he recovers it from the parties in equal proportion.

Mr. Diwakar said that it is charged on issuance of broker note. let me clarify that there is no relation of both things. In any case the broker has to issue contract note.

The issuance of broker / contract note is as per SEBI Regulations and Stamp Duty comes under the Stamp Duty Act.

Regards,

CA. Amol G. Kabra

Rasesh (CS CWA MBA (Fin) B.Com LL.B (Spl)) (6501 Points)
Replied 28 November 2009

I agree with the views given by Mr. Amol Kabra

Ashok Garg (Consultancy) (40 Points)
Replied 05 November 2011

Transfer of shares held in demat form do not attract stamp duty . It is very much clarified by a notification issud in this regard.

The law is that stamo duty under the Stmap Duty Act is not a duty on transaction but a duty on an "Instrument"/"dpcument". Since in case of transfer of shares in demat form there is no instrument for transfer as such , there could not be levy of stamp duty.

There is another interesting issue about stamp duty on share certificates. Where shares are issued directly in demat form, there can not be levy of stamp duty because there is no share certificate. On the internet , some people have opines that in case of direct credit of shares in demat account (original allotment) there is liability of stamp duty. In my humble opinion , since there is no share certificate or an instrument as such , and becasue stamp duty is levy on instrument and not a transaction , there cannot be liability of stamp duty.

Opinions with reasons are olicited.

Ashok Garg

Advocate