Stamp duty on share certificates

STAMP DUTY ON SHARE CERTIFICATES

 Introduction

The Companies Act 2013, and the provisions of the Indian Stamp Act, 1899 mandate that a stamp duty has to be paid on share certificates. As per Section 56(4) of the Companies Act, 2013, every company that issues shares with investors and shareholders or employees is required to issue a share certificate within two months of allotment of such shares. The shares certificates have to be stamped within 30 days of issuance of certificates. The rate of stamp duty for share certificates has been made uniform after the passing of an amendment to the Indian Stamp Act in 2019. For the issue of share certificates, this rate is fixed at 0.005% for all states.

• Transfer of Securities (Physical Mode): Stamp duty for transferring shares in physical form is fixed at 0.015% of the total market value of the shares.

• Stamp duty on dematerialised shares: Since 2019, a compulsory stamp duty is required to be paid even on dematerialised shares. This brings physical shares at par with dematerialised securities, at 0.015%.

• Stamp Duty on Bonus Shares: Stamp duty on bonus shares is levied based on the market value, considering the price or consideration involved in the issuance.

• Stamp Duty on ESOP Shares: Stamp duty for shares issued through ESOP (Employee Stock Ownership Plans) is calculated on the exercise price mentioned in the allotment list.

• Duplicate Share Certificates: If the original document was duly stamped, no stamp duty is required to issue duplicate share certificates, as it is not considered a case of sale, transfer, or issuance of securities.

Documents required for stamping of shares certificates

• Application form duly affixed with Rs.10/- court fee stamp.

• Certified copy of Share Certificates

• Copy of Form PAS-3/ Copy of SPICe Form Part B

• Certified copy of board resolution

• Certified copy of PAN of company

• Certified copy of Memorandum and Articles of Association

• Certified copy of list of existing directors

• Certified copy of list of Allottees/Share Certificate Holders

• Certified Authority letter of Company Secretary/Chartered Accountant (having a valid ICSI/ICAI membership).

Rates of Stamp Duty for Share Certificates

After the amendment, the stamp duty rate for issuing share certificates is standardised across the country. The table below shows the pre-amendment and post-amendment rates for share certificates and transfer of shares in physical form and Demat.         

Stamp duty shall be paid where the registered office of the company is established. Since payment of Stamp duty on issuance of share certificates is a state subject, therefore, mode of paying the stamp duty also varies from state to state. In some states you can pay the amount online via SHCIL e-stamp website link, at some states it is offline, and, in some states, you can buy stamp paper or get the franking done from the Registrar’s office. 

Penalty for non-payment of Stamp Duty 

In case a company fails to apply for stamping of share certificates within the stipulated time period, a penalty up to 10 times of the stamp duty amount can be levied by the relevant authority. Interest may also become payable for the delay. Under Section 43, prosecution of any person who has committed an offense against the Stamp Act can also be carried out. Under Section 62, any person who executes or signs without the instrument being duly stamped, shall be punishable with a fine which may extend to 500. If a share warrant is issued without being duly stamped, the company issuing the same and also every person who at the time when it is issued is the managing director, or secretary, or principal officer of the company shall be punishable with fine which may extend to 500.

Delay in payment of stamp duty on share certificates

If the stamp duty has not been paid within the stipulated timeline, the same process is to be followed to pay it now, as if it were a fresh application along with a penalty for such delay. In Delhi, you have to go to the revenue department by making a file with all necessary documents, and details duly filled in format prescribed by the department, then they will give you  a date of hearing of the matter and on the date of hearing they will finalize the penalty and then you have to pay the stamp duty with penalty. After payment visit there once again with proof of payment then they will issue a certificate that stamp duty has been paid.

The process for paying stamp duty for the issue of share certificate in the Private Limited Company/Start-up Company-

•  Determine the applicable stamp duty rate: Check the stamp duty rates applicable in your state for issuing share certificates. These rates are typically specified in the state's stamp duty schedule or notification.

•  Calculate the stamp duty amount: Calculate the stamp duty amount based on the number of shares being issued and the applicable rate. The stamp duty is usually calculated as a percentage of the face value or market value of the shares, depending on the state's regulations.

• Purchase the stamp paper: Purchase non-judicial stamp paper of the required value for the calculated stamp duty amount. Stamp papers are usually available at licensed stamp vendors or designated government offices.

• Prepare the share certificate: Prepare the share certificate document with all the necessary details, including the stamp paper.

• Affix the stamp paper: Affix the purchased stamp paper to the share certificate document as per the stamp duty requirements. The stamp paper should be canceled by writing or printing the necessary details such as the date, amount, and name of the person affixing the stamp.

• Sign and seal the share certificate: The share certificate should be signed by authorized signatories of the company and affixed with the company's seal.

• Register the share certificate: Register the share certificate in the company's register of members and maintain proper records.

• Get the Document Stamped: Visit the Sub Registrar's Office or the authorized stamping center with the document and the paid stamp duty. Present the document to the designated officer for verification and stamping. The officer will authenticate the document by endorsing it with an official stamp or seal.

• Collect the Stamped Document: After the document has been stamped, collect the document from the office. The stamped document serves as proof of payment of stamp duty.

The process of paying stamp duty on share Certificates depends on the specific requirements and procedures may vary based on the regulations of your state and the stamp duty regulations applicable in your state for accurate and up-to-date information on issuing share certificates and paying stamp duty. For Delhi, Stamp duty can be paid through the portal of Stock Holding Corporation of India Limited (SHCIL). This online portal facilitates the payment of stamp duty for the state.