Stamp Duty

Stamp Duty: Stamp Duty is the tax imposed on the purchase or sale of legal property, attorney, documentations, and agreements. The validity of an agreement is only considered when the other party duly signed it and doesn’t back out of it or play a scam. The stamp paper is basically a transaction tax for the government’s revenues.

According to Section 3 of the Indian Stamp Act,1899, Stamp Duty is payable to ensure the legality of purchase and sale of a property, legal attorney, and agreements. The rates of Stamp Duty are different in every State for specified instruments which are determined by the Central Government. If an individual has done the proper payment for Stamp Duty on his/her document or agreement then, his/her document is accepted and admissible as evidence in court. A document is not accepted and admissible as evidence in court when it is not properly stamped.

Adoption Deed Affidavit, Divorce Entry or Memorandum of Marriage, Gift Indemnity Bond Lease, etc, are some of the documents which require payment of Stamp Duty.

Stamp Duty is considered to be the best source of revenue for each and every state. Stamp Duty is the second largest revenue source in Maharashtra after sales tax.

To ensure the validity of an agreement, it is important that the Stamp Paper must have the name of the concerned party or business purchasing it. An individual can claim a refund for an unused Stamp Paper but he/she has to make the claim 6 months from the date of purchase.

Need for Stamping

Stamp Duty is the tax imposed on the purchase or sale of legal property, attorney, documentations, and agreements. The validity of an agreement is only considered when the other party duly signed it and doesn’t back out of it or play a scam. The stamp paper is basically a transaction tax for the government’s revenues. Most of the documents are considered valid if they have a specific value printed on the Stamp Paper. The value printed may start from a minimum value of Rs.10 to no limit on the maximum value.

Terms Associated with Stamp and Stamp Duty

Instrument: Instrument means any document transferable, created, limited, extended, extinguished, or recorded for any right or liability.
Execution: Execution means taking signatures of the party/parties concerned with the execution of the instrument.

Stamp Duty Collection

Identification of the document/instrument’s category is the first step for the calculation of Stamp Duty. For calculation of Stamp Duty, there are three categories as follows;

The value of Stamp Duty is fixed under the First Category even if a different value is mentioned in the document/instrument. Administration Bond, Affidavit, Adoption Deed, Appointment in Execution of Power, Divorce, Apprenticeship Deed, Award, Article of Clerkship, Cancellation Deed, Duplicate, Charter Party, Copy of Extracts, Indemnity Bond, Power of Attorney, etc. are the examples of such instruments.
The value of Stamp Duty charges is dependent under the Second Category, upon the mentioned value in the document/instrument. Mortgage Deed, Lease Agreement, Title Deeds, Security Bond, Hypothecation Deed, Article of Association, etc are such instruments.
The value of Stamp Duty depends either on the market value or value mentioned in the document/instrument under the Third Category. Conveyance, Agreement for sale, Gift exchange, Partnership Deed, Development Agreement, Transfer of Immovable Property, Trust Deed, Partition, etc are such instruments.

Who Pays the Stamp Duty?

In case there is an absence of any agreement, the Stamp Duty is to be paid by the purchaser whereas both the parties have to bear the Stamp Duty equally for the purchase of a property.

Payment Process for Stamp Duty

There are three ways for payment of Stamp Duty. Although, these options are not available for every state. It is the choice of an individual to choose the method if all of them are available. The payment methods are;

Use of Non-Judicial Stamp Papers.
Use of E-stamping facilities.
Use of a Franking machine.

Difference Between Stamping, Notarising, and Registering a Document

Stamping, Notarising, and Registration of a Document are different from each other.

Notarisation is the process of certification of a document and the signature of the individual. It is done by a Notary and the process of notarisation is performed under Notaries Act, 1952. Notarisation is done to certify the document’s genuineness and for fraud prevention. The Notary is a potential, unbiased witness to ensure the documents are genuine.
Registration is the process of entering the subject matter of the documents. Document registration acts as a notice to the public. The compulsion of document registration is dealt with under Section 17 of the Indian Registration Act 1908. To conserve the evidence and title, registration plays a crucial role.
Stamp Duty is payable to ensure the legality of purchase and sale of a property, legal attorney, and agreements. Stamp Duty is considered to be the best source of revenue for each and every state. If an individual has done the proper payment for Stamp Duty on his/her document or agreement then, his/her document is accepted and admissible as evidence in court.

Telgi Stamp Paper Scam

Duplicacy of Stamp Papers and their sale to banks and other institutions were the reason for the Telgi Stamp Paper scam. The scam included a huge blow of Rs.32,000 crores to the Indian economy. The mastermind behind this multi-crore scam was Abdul Karim Telgi. He printed fake stamp papers using Stamp-printing machines which he acquired illegally with the help of the Central government’s security printing press officials which is located in Nasik. In more than 12 states, the fake stamp papers dig through a widespread network of vendors.

The scam broke in August 2000 when Bangalore police arrested 2 possessing fake stamps. The job was assigned The Special Investigation. Telgi and several associates were sentenced to ten years’ strict imprisonment on the 17th of January 2006. Telgi was sentenced to 13 years imprisonment and fined a whopping Rs 202 crore on the 28th of June 2007.