From July 1, 2020, Central Government has enforced the amendments to the Indian Stamp Act, 1899, and the Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules as proposed under Part I, Chapter IV of the Finance Act, 2019 on 10th December, 2019. Therefore, the rate of stamp duty will change for debentures, transfer of demat securities, futures, options, currency and interest rate derivatives, government securities and repo on corporate bonds. Off-market transactions, including transfer of shares at the time of inheritance, gifts and transactions in unlisted securities among others, will also be charged a fee.
- These amendments are introducing a uniform rate of stamp duty on trading of shares and commodities which was being charged at different rates by different states.
- Notably, the changes were first scheduled to come into force on January 9, 2020, which was later extended to April 1, 2020. The implementation was further extended until July 1, 2020 amid lockdown.
Reason for amendment
The present system of collection of stamp duty on securities market transactions led to multiple rates for the same instrument, resulting in jurisdictional disputes and multiple incidences of duty, thereby raising the transaction costs in the securities market and hurting capital formation. The Central Government has now created the legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency.
Key Points regarding amendments:
-Stamp duty was payable by both seller and buyer whereas in the new system it is levied only on one side i.e. buyer.
-Earlier brokers had to register with different states and collect and pay stamp duty to them. Now the exchanges will do the payment to states on behalf of brokers, reducing the burden on brokers.
-Stamp duty will be payable to the state in which the client and specifically the buyer in a transaction is located.Â
–Clearing Corporation of India Limited (CCIL) under the jurisdiction of Reserve Bank of India (RBI) and the Registrars to an Issue and/or Share Transfer Agents (RTI/STAs) to act as a collecting agent.
-No stamp duty shall be chargeable in respect of the Instruments of transaction in stock exchanges and depositories established in any International Financial Services Centre (IFSC) set up under section 18 of the Special Economic Zones Act, 2005.
-The collecting agent may deduct 0.2 per cent of the stamp-duty collected on behalf of the State Government towards facilitation charges before transferring the same to such State Government.
Stamp Duty Rates w.e.f. 1st July 2020
| Instrument | Rate |
| Issue of Debenture | 0.005% |
| Transfer and Re-issue of debenture | 0.0001% |
| Issue of security other than debenture | 0.005% |
| Transfer of security other than debenture on delivery basis; | 0.015% |
| Transfer of security other than debenture on non-delivery basis | 0.003% |
| Derivatives–– | |
| (i) Futures (Equity and Commodity) | 0.002% |
| (ii) Options (Equity and Commodity) | 0.003% |
| (iii) Currency and Interest Rate Derivatives | 0.0001% |
| (iv) Other Derivatives | 0.002% |
| Government Securities | 0% |
| Repo on Corporate Bonds | 0.00001% |
