Significant amendments made to Indian Stamp Act

The central government vide a notification extended the date on which amendments made to the Indian Stamp Act, 1899, through the Finance Act, 2019, would come into effect on 1 April 2020.

Laws pertaining to stamp duty form part of the concurrent list of the constitution and, therefore, both the centre as well as the state have powers to make laws pertaining to this subject. The Indian Stamp Act is the central legislation and various states have their own stamp acts that deal with levy of stamp duty within the particular state. However, the amendments to the Indian Stamp Act have reformed the process of levy and collection of stamp duty in respect of instruments of transaction in stock exchanges and depositaries. Some of the changes are:

• Would replace broker turnover stamp duty with stamp duty on the clearance list used for transactions through stock exchange.
• Stamp duties would be collected by the stock exchanges or their authorized clearing corporations and the depositories on behalf of various state governments.
• No more stamp duty waivers on transfer of securities and mutual fund units in dematerialized form.
• Further, the Finance Act has inserted section 9AA to the Indian Stamp Act, which provides for stamp duty liability for instruments of transaction in stock exchanges and depositories. This is applicable for the following instruments:
• sale of any securities (delivery based or otherwise) through a stock exchange;
• transfer of securities for consideration (delivery based or otherwise) made by a depository; and
• pursuant to issue of securities, any creation of charge in the records of the depository, stamp duty would be collected by the stock exchange/depository, as the case may be, in line with the amended provision of the Indian Stamp Act.

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