The Indian Stamp Act 1899 is the central fiscal law that requires stamp duty to be paid on specified legal documents, sets the rates through Schedule I, assigns liability to particular parties, and imposes penalties of up to ten times the deficient duty when a document is unstamped or under-stamped.1India Code. The Indian Stamp Act, 1899 The Act applies only to non-judicial instruments used in commercial and private transactions; court fees and litigation costs sit under a separate law, the Court Fees Act 1870.
Which Documents Attract Stamp Duty
Schedule I of the Act lists every document type that attracts duty along with the applicable rate or formula.1India Code. The Indian Stamp Act, 1899 Common items on that list are bills of exchange and promissory notes, life and general insurance policies, conveyances and sale deeds, share transfers and debentures, lease and mortgage deeds, letters of credit and bonds, and receipts for money or property exceeding ₹5,000.
Rate-setting authority splits between two levels of government. The Central Government controls duty on bills of exchange, cheques, promissory notes, letters of credit, insurance policies, share transfers, proxies, and receipts. State governments set rates for every other instrument and can amend their schedules.
Duty attaches to the physical document, not to the underlying deal. A verbal agreement to sell property triggers nothing; the obligation arises the moment a written instrument is executed. Territorial reach is broad. Anything executed within India must be stamped, and a document executed abroad also attracts duty once it is received in India if it relates to property in India or to a matter to be performed here.1India Code. The Indian Stamp Act, 1899 The location of the asset drives the obligation, not the place where signatures went on paper.
Who Is Liable to Pay
Section 29 assigns liability by document type, and parties can shift the cost by contract. In the absence of a contrary agreement, the defaults are:2Indian Kanoon. Section 29 in The Indian Stamp Act, 1899
- Bonds, promissory notes, and bills of exchange: the person making or executing the instrument.
- Conveyances and sale deeds: the buyer.
- Lease agreements: the tenant. Counterpart of a lease: the landlord.
- Exchange instruments: both parties equally.
- Partition instruments: each party in proportion to their share.
- General insurance policies: the person taking the policy. Fire insurance: the insurer.
- Securities sold on a stock exchange: the buyer. Securities sold outside a stock exchange: the seller.
For any instrument not specifically listed, the person who draws, makes, or executes it pays.2Indian Kanoon. Section 29 in The Indian Stamp Act, 1899 Property deals are where arguments most often start, so writing the cost allocation into the agreement itself is the simplest way to prevent them.
When the Duty Must Be Paid
Timing is strict. Section 17 requires instruments executed within India to be stamped before or at the time of execution.1India Code. The Indian Stamp Act, 1899 Signing on plain paper today and buying stamp paper next week is already a technical breach.
For instruments executed outside India, Section 18 opens a three-month window from the date the document is first received in the country.1India Code. The Indian Stamp Act, 1899 If the required stamp cannot be affixed privately, the instrument can be taken to the Collector within those three months for official stamping. Miss the window and the document becomes insufficiently stamped, with everything that follows from that.
How the Amount Is Set and Paid
Duties come in two shapes. Fixed duties apply to certain simple instruments at a flat amount regardless of the sums involved. Ad valorem duties, which dominate high-value transactions, are calculated as a percentage of the consideration stated in the document or the market value of the property, whichever is higher. States publish market-value guidelines for property, and the Collector compares the stated price against those benchmarks.
Where the correct duty is genuinely unclear, Section 31 allows any person to present the instrument to the Collector, pay a ₹100 fee, and obtain an official determination.3India Code. Indian Stamp Act 1899 – Adjudication as to Proper Stamp Complex agreements with multiple components or contingent payments are the natural candidates, because guessing wrong exposes you to penalty later.
Payment can be made through several channels. Impressed stamps are pre-printed stamp papers on which the document is written or printed. Adhesive stamps are labels affixed at execution; Section 12 requires the person affixing one to cancel it by writing their name or initials and the date across it, and an uncancelled adhesive stamp is treated as if no stamp exists at all.1India Code. The Indian Stamp Act, 1899 Franking is a machine-stamping process carried out by an authorized bank or agency that imprints the duty amount directly on the document. E-stamping generates a secure certificate with a unique identification number that can be verified online, and it has replaced physical stamp paper in most states for higher-value transactions. Whichever channel you use, payment must be complete before or at execution.
What Happens If a Document Is Unstamped
The consequences are immediate and consequential. Any person authorized to receive evidence, including judges and registrars, must impound an instrument that appears unstamped or insufficiently stamped when it comes before them.4India Code. Indian Stamp Act, 1899 – Section 33 The obligation is mandatory for everyone except police officers.
Under Section 35, an unstamped or insufficiently stamped instrument cannot be admitted in evidence, acted upon, registered, or authenticated by any authority.1India Code. The Indian Stamp Act, 1899 Your contract or deed is useless in court until the defect is cured.
Curing the Deficiency
Section 35 does provide a route back. An impounded instrument can be admitted once the party pays the full deficient duty plus a penalty. The penalty is ₹5 where the shortfall is small, but where ten times the deficient duty exceeds ₹5, the penalty rises to ten times the amount of the proper duty or the deficient portion.1India Code. The Indian Stamp Act, 1899 On a conveyance where ₹50,000 of duty was evaded, the penalty is ₹5,00,000 on top of the original ₹50,000. A stamping shortcut becomes an expensive one.
Criminal Proceedings Exception
One carve-out matters. An unstamped document can be admitted in criminal court proceedings, except in certain maintenance and civil dispute proceedings under the Code of Criminal Procedure.5India Code. Indian Stamp Act 1899 – Section 35 The state’s interest in collecting duty is not allowed to obstruct a prosecution or defence.
Criminal Offences for Deliberate Evasion
Two separate offences sit alongside the civil penalty. Section 62 targets anyone who executes, signs, endorses, or transfers an instrument knowing it is not duly stamped, and the punishment is a fine of up to ₹500. The fine applies to each person involved, not only to the party who was supposed to pay.
Section 64 is aimed at the more serious conduct of deliberately concealing facts or misstating consideration in a document to reduce the duty payable. Anyone who executes such an instrument, or who prepares it while deliberately omitting relevant facts, faces a fine of up to ₹5,000.6Indian Kanoon. Section 64 in The Indian Stamp Act, 1899 The provision reaches the practice of understating property sale prices in conveyance deeds.
Refunds for Spoiled or Unused Stamps
Stamp paper sometimes goes to waste when a document contains errors or a transaction collapses after the paper has been bought. Section 49 lets the Collector grant a refund or allowance for impressed stamps that are spoiled or rendered unfit for use, provided the application is made within the time limit prescribed by Section 50. That section sets a six-month deadline from the date the stamp was spoiled for stamps on which an instrument has been executed, with shorter windows in some circumstances. The Collector must be satisfied that the spoilage was genuine and that the stamp has not been used for any completed transaction.
The 2019 Change for Securities Transactions
The Finance Act 2019, effective from 1 July 2020, restructured collection of stamp duty on securities. Duty is now collected at a single point. Stock exchanges and authorized clearing corporations collect it on exchange-based secondary market transactions, and depositories collect it on off-market transfers and on initial issues in dematerialized form. It is charged on one side of the transaction only, typically the buyer for exchange trades and the seller for off-market transfers. The collecting agent transfers the duty to the state government where the buyer resides, retaining 0.2 per cent as a facilitation charge.7Press Information Bureau. Implementation of Amendments in the Indian Stamp Act, 1899 Transactions in International Financial Services Centres are exempt from stamp duty entirely.