The Finance Bill, 2019 has brought many amendments in the Indian Stamp Act, 1899. The amendments introduce a single point for collection of stamp duty by authorized entities. The key amendments are below:
1. For a transaction in stock exchanges, the government will designate collecting agencies for collecting stamp duty :
- The Finance bill has added “Part AA – liability of instruments of transactions in stock exchanges and depositories to duty” to the Stamp Act, 1899. This part has a new section 9A which states that on the sale of any securities through the stock exchange or depository, stamp duty has to be given by the buyer to authorized stock exchange/a clearing corporation/depository on behalf of the State Government. The duty will depend on the market value of the securities at the time of the transaction. The collecting agency (stock exchange, clearing corporation or depository) will have three weeks at the end of each month to transfer the collected stamp duty to the State Government. The duty will be transferred to the State in which the buyer resides. If the buyer is outside India then the State Govt. having registered address of the trading member or broker shall receive the duty.
- If the issuer makes an issue of securities other than through a stock exchange or depository, the stamp duty on every single issue has to be paid by the issuer at his registered office. The market value of the securities issued specified in Schedule I will be taken into account to calculate the duty.
2. Penalty on collecting agencies if they fail to collect duty:
A penalty of not less than Rs. 1 Lakh which can be extended to 1% of the collection will be made against collecting agencies who fail to collect the duty or fails to transfer the same within 15 days of the specified time period.
3. Change in Stamp Duty:
Debentures:
- Stamp duty on debentures – 0.005%
- Re-issue – 0.0001%
- 0.05% per year of the face value of the debenture subject to the maximum of 0.25% or Rs. 25 lakhs, whichever is lower and the debenture are transferred by way of delivery or by an endorsement or by a separate instrument of transfer.
Security (other than a debenture):
- Security other than debenture – 0.005% (currently it is @0.1%),
- If the security is transferred other than debenture on delivery basis – 0.015% ,
- If the security is transferred other than debenture on non delivery basis – 0.003%,
- Other derivatives – 0.002%
- Govt. Securities- 0%,
- Repo on Corporate Bonds- 0.00001%.
Derivatives:
- Futures – 0.002%
- Options – 0.003%,
- Currency and interest rate derivatives – 0.0001%
- Other derivatives – 0.002%
4. Amendment to the key definitions:
Instrument- An electronic document created for a transaction in a stock exchange or depository by which any right or liability is or purports to be, created, transferred, limited, extended, extinguished or recorded and any other document mentioned in Schedule I.
Debenture
- Debenture stock, bonds or anything that shows a debt on a company
- Bonds in the nature of debentures issued by any incorporated company or body corporate
- Certificate of deposit, commercial usance bill, commercial paper and such other debt documents of original or initial maturity up to one year, specified by the Reserve Bank of India (RBI)
- Any other debt documents specified by the Securities and Exchange Board of India
“Debenture” is no more a part of the definition of “bonds.” Which means stamp duty on debentures will become chargeable only under Article 27 (Union list) of the Act.
Securities:
- Securities, as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956
- A “derivative,” as defined in clause (a) of section 45U of the RBI Act, 1934
- A certificate of deposit, commercial usance bill, commercial paper, repo on corporate bonds of original or initial maturity up to one year as per the RBI
- Any other instrument declared by the Central Government, by notification in the Official Gazette
5. Stamp Duty on the transfer of dematerialized securities:
Under section 8A(c)(ii) & (iii) of the Act, stamp duty was exempted in case of transfer of securities in demat form between beneficial owners. This has now been deleted with limitations to transfer of securities from a person to a depository or from a depository to a beneficial owner. The rates for stamp duty on transfer of securities are as follows:
- Transfer and re-issue of debentures – 0.0001%
- Transfer of security (other than a debenture) on the delivery basis – 0.015%