Indian Stamp Act: An Overview

Documentation works are such type that are essentially required at personal level as well as at professional level and it is not only required for a person, but also required for the government. For the government, such documentation work is indispensable, as without such regulatory framework, it is very difficult to keep track of such transactions. The British government revised the Indian Stamp Act in 1899 with the primary objective of generating money for the government. This Act requires the payment of stamp duty on certain and defined papers. The Indian Stamp Act is a piece of fiscal law.

Objectives of the Stamp Act, 1899

Through this Act, government primary generates revenue that helps government to perform its duty with ease. However, in a court of law, a stamped document is admissible as evidence. The Stamp Act also requires the payment of stamp duty on certain papers, which makes those documents legally legitimate and authentic.

Stamp Duty

Stamp duty is the tax that must be paid on a certain document. Stamp duty might be constant or variable depending on the product's worth. Stamp duty is a charge levied on the exchange of papers or the execution of instruments.

Stamp duty may be divided into two categories

• Impressed stamp − An imprinted stamp is created by the engraving or embossing process. The labels are applied to impressed stamps, and the impressions are made by franking machines in the bank.

• Adhesive stamp − Adhesive stamps are stamps that may be adhered to a paper with any type of adhesive. Adhesive stamps are classified into two types

• Postal stamps − Postal stamps have a restricted range of applications. Postal stamps are used for transactions with the post office.

• Non-postal stamps − Unlike postal stamps, non-postal stamps have a broader range of applications. Non-postal stamps include revenue stamps, court fee stamps, and insurance policy stamps, among others.

Important terms under the Act

There are a few key phrases associated with the Indian Stamp Act of 1899. It is critical that we are aware of these words, which are as follows

Provision	Term	Definition
Section 2 (10)	Conveyance	It essentially consists of a property transfer document. It covers both moveable and immovable property. Conveyance includes a sale deed, lease transfer, release, and settlement.
Section 2 (11).	Duly Stamped	It indicates that the instrument carries the adhesive or impressed stamps, in the amount required by law, and in the form required by law. The Stamp Act's provisions and schedule control the quantity of stamp to be used. The mode of stamping is controlled by sections 10 to 19 of the Act as well as the government's guidelines. This section contains information on the description of state and the quantity of stamps to be utilized. Thus, if an instrument is to be written on paper with an impressed stamp but only carries an adhesive stamp of the value, it is not correctly stamped, and vice versa
Section 2 (14)	Instrument	An instrument is any document that creates, transfers, extends, or extinguishes any right or responsibility. An instrument is a document that aids in the recording of such rights and liabilities, even though the instrument itself does not generate such rights or liabilities.

Valuation of Stamp Duty

Stamp duty is assessed on an ad valorem basis, which means that it depends on the value of the property, among other factors. The issue of how to value instruments is addressed by Sections 20 to 27 of the Indian Stamp Act, with the exception of Section 22. This issue is brought up by the fact that instruments are liable to duty. In these circumstances, value is assessed based on the following standards.

Provisions	Purpose
Section 20- Value if amount is expressed in foreign currency	Section 20 of the Stamp Act states that if an amount is stated in a foreign currency, the exchange rate in force on the document's date should be used to calculate the value in Indian rupees (1) The Central Government may periodically set such rates for the purpose of determining stamp duty (Section 20). (2) This rate will be considered for appraising the asset rather than the current market rate. If a document contains the current exchange rate and is stamped using that rate, it will be considered (unless the contrary is shown) that it is duly stamped
Sections 21- Valuation of stock and marketable securities	To establish the stock's or security's value, the instrument's date's average price for the stock or security will be utilized - Section 21 Stamp duty is thus required in the case of a share transfer deed based on the market value of the shares on the day the document was executed.
Section 23- No duty on penal interest portion mentioned in the instrument	Section 23 indicates that valuation must be carried out without taking the penal interest portion into account, even if a document specifies that punitive interest would be assessed.
Section 24-Valuation in case of transfer in consideration of debt	Even if a contract says that punitive interest will be levied, Section 23 states that valuation must be performed without taking the penal interest part into consideration. When any property is given to a person in settlement (or consideration of) a debt due to that person, the transfer counts as "consideration" for the purposes of ad valorem duty value. In a manner similar to this, cash or stock will be considered consideration for value purposes if property is transferred in return for payment or the transfer of either. In addition, if the sale of the property is mortgage-subject, any existing mortgages and any interest payable, if any, will be taken into account as part of the consideration.
Section 25- Valuation in case of annuit	Instead of a single huge payout, some contracts include annuities or monthly payments. The evaluation is finished in this instance as follows If the length of the annuity is predetermined, the total amount of annuity payments anticipated throughout that time period will be considered. If the annuity is payable forever or for an indefinite period of time, the full amount payable within 20 years of the date the first payment is due will be considered for valuation. However, the payment of an annuity shouldn't be based on the existence or dying of any one person for such an eons. Section 25 indicates that if a person's life or death impacts the payment of an annuity.
Section 26- Provision when value is indeterminable	The stamp shall be established based on an estimated valuation where the subject matter's value cannot be ascertained with certainty on the day of execution. However, the maximum amount that can be claimed on such an instrument in this circumstance is simply the value on which stamp duty has actually been paid, and nothing more - Section 26.

E-Stamp

Modernization led to the introduction of an e-stamp, sometimes known as an electronic stamp. E-stamps are essentially stamps that are produced electronically and can be used for non-judicial purposes as well as to pay taxes. The state can use a computer-based procedure known as "e-stamping" to safely pay non-judicial stamping costs.

Advantages of E-stamp

The benefits of E-Stamp are as follows

• Using e-stamps takes less time.

• Accessing them is not difficult at all.

• They lower expenses.

• Using e-stamps is easy.

Conclusion

Under the Indian Stamp Act, the assessment or computation of stamp duty is less difficult to understand. Furthermore, it gives the government a reliable source of money. If the collector has any doubts regarding the appropriate amount of duty to be charged for the document, they may, in line with the Stamp Act, write a statement of the matter and submit it to the Controlling Revenue Authority.

Several of the parts of the Indian Stamp Act, 1899, have needed to be changed since it was first introduced. Significant changes were made in this regard in the Law Commission's 67th report, which was published in 1976. These changes included, among other things, modifications to the procedures for drafting legal documents and computations, an improvement in the language of the law to make it more comprehensible, tougher penalties for Act violations, and the addition of provisions relating to postage stamps.

Frequently Asked Questions

Q1. What is stamp duty?

Ans. Stamp duty is a tax levied by the Government on the execution of instruments.

Q2. What is the Indian Stamp Act 1899?

Ans. The Indian Stamp Act is a piece of fiscal law that was passed only as a means of collecting income for the government. This Act mandates that certain and particular documents be subject to stamp duty payments.

Q3. What instruments are covered by the Indian Stamps Act?

Ans. An "instrument" is any "document by which any right or liability is, or appears to be, formed, transferred, limited, extended, cancelled, or recorded," according to Indian stamping laws.

Q4. What method does the Act use to collect stamp duty in case of financial securities?

Ans. Stock exchanges are responsible for collecting stamp duty on all exchange-based secondary market transactions in securities. Depositories are responsible for collecting stamp duty on off-market transactions (which are made for a consideration disclosed by trading parties) and initial issues of securities occurring in demat form.