FAQ’S ON Stamp Duty

Frequently Asked Questions
Stamp Duty on Documents
-      By Adv. R. P. Rathod.

The Bombay Stamp Act, 1958 comes into force on 16th February, 1959 and is applicable in the State of Maharashtra. This Act is intended to levy Stamp duty on certain types of documents executed in the State or brought from outside for acting upon the same in the State. The various instruments/ documents are broadly covered under different 62 articles listed in Schedule- I appended to the Act.
The rates at which stamp duty is levied on these documents are mentioned in Schedule I. The Bombay Stamp Act levies Stamp duty on documents/ instruments by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. The stamp duty is payable on instrument and not on the transactions.

It is a type of tax which is paid for the transaction performed by way of document or instrument under the provisions of Bombay Stamp Act, 1958 and Indian Stamp Act, 1899.

Q. 2.
It is payable on instruments and not on transactions. The definition of the term instrument is very wide.

Q. 3.
Instrument means any document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded.

Q. 4.
As defined in Evidence Act, document means only matter expressed or described upon substance by means of letters, figures or marks or by more than any of those means intended to be used or which may used for the purpose of recording that matter.

Q. 5.
The payment of proper Stamp duty on instruments bestows legality on them. Such instruments get evidentiary value and are admitted in evidence in Court of law. The instruments which are not properly stamped are not admitted in evidence.

Q. 6.
The following Articles of The Indian Stamp Act, 1899 attract Stamp duty in the state of Maharashtra
Article No.
Description of instrument.
Bill of Exchange
Bill of Lading-
Letter of Credit
Policy of Insurance
Promissory Note

Execution means putting signatures on the instruments by the person/persons executing the instruments.

Q. 8.
Broadly the 62 articles of Schedule I are grouped in three categories:
Category i): Articles whose amount of Stamp duty is fixed irrespective of the value mentioned in the document/ instrument. (Viz. Administration Bond, Adoption deed, Affidavit, Divorce, Appointment in execution of power, Apprenticeship deed, Article of clerkship, Award, Cancellation deed, Charter party, Duplicate, Copy of Extracts, Entry of Memorandum of Marriage, Indemnity Bond, Letter of license, Memorandum of Association of a company, Notarial Act, Power of attorney, etc.)
Category ii): Articles where depending upon the value mentioned in the document, the amount of stamp duty is varied. (Viz. Agreement relating to deposit of title deeds, pawn, pledge or hypothecation, Clearance List, Lease, Article of association, Mortgage deed, Security Bond, etc.)
Category iii): Articles which attracts Stamp duty on the consideration mentioned in the document or True Market Value, whichever is higher. (Viz. Conveyance, Agreement for sale, Gift, Exchange, Partnership Deed, Partition, Development Agreement, Transfer, Trust, etc.)
For category I and II types of instruments the Stamp duty payable can be ascertained by referring to the Schedule I; but to ascertain the Stamp duty on the instruments mentioned in Category III, the expertise in valuation is required. The True Market Value is determined as per the provision of the Bombay Stamp (Determination of True market value of the property) Rules, 1995.

Q. 9.
The Section 17 & 18 of the Act states the time of payment stamp duty. Generally all the instruments executed in the state shall be stamped before or at the time of execution or immediately thereafter or on the next working day following the day of execution. Similarly, the instrument which is executed out of the state and within three months from its receipt in the state shall be stamped.

Q. 10.
Stamp Duty can be paid by
  1. Using Stamp paper
  2. Using adhesive stamps
  3. Franking

Q. 11.
As per the provisions of Section 30 the onus of payment of Stamp duty in the absence of an agreement to the contrary, shall be borne by the executing in the manner provided their with respect of certain kinds of documents viz. Mortgage deed, release, security bond, settlement, bond etc. in the case of conveyance, the grantee and lease the lessee shall pay the stamp duty in the case of exchange of property, both the parties in equal share shall pay stamp duty. In case of partition, the parties thereto in proportion to their respective shares should pay stamp duty.

Q. 12.
Section 31, of Bombay Stamp Act, 1958 deals with the adjudication of the instruments. Adjudication means determining the chargeability of stamps duty on instruments. The authority to be approached is the Collector of Stamps appointed in each District. Application for adjudication should be accompanied by true copy or an abstract of the instrument and also with such affidavit or other evidence as may be necessary to prove that all facts affecting the chargeability of the instrument have been truly set forth in the instrument along with the proof of payment of Rs. 50/- as adjudication fee. Adjudication can be done both for signed as well as unsigned documents.

Q. 13.
The Document which is chargeable with Stamp duty can be prepared on the non-judicial Stamp paper of appropriate value. Unexecuted document can be got franked with special adhesive Stamps by Franking Machine intended for stamping such documents, by tendering required amount in the office of collector of Stamps wherever this facility is available. When documents is lodged for adjudication, on receiving intimation as to the amount of Stamp duty payable by tendering appropriate amount equal to the amount of Stamp duty and penalty if any, the Collector of Stamp shall certify the document as to the payment of proper duty.

Q. 14.
As per the provisions of Section 52-B, the stamps which are purchased and not used within six months shall be rendered invalid thereafter. The stamps purchased and not used for intended purpose are entitled for refund after deduction of certain charges, if lodged for refund within six months from the date of purchase and on fulfilling the conditions stipulated in Chapter V of the Bombay Stamp Act, 1958.

Q. 15.
The documents if not duly stamped, shall not be admissible in evidence in the court of law. As per the provision of Section 59, any person who, with the intention to evade the Stamp duty, executes or signs any instruments chargeable with stamp duty, without the same being duly stamped, shall on conviction, be punished with rigorous imprisonment for term which shall not be less than one month but which may be extended up to six months and fine up to Rs. Five Thousand. The Section 67 and 68 empowers the authorities to enter upon any premises and to inspect and impound/ seize the documents which are not duly stamped and burden is casted upon every public officer to assist the authorities in detection of evasion. The documents impounded for want of proper duty, attracts penalty @ 2 % per month from the date of execution of such document. Miscellaneous

Q. 16.
The stamps are required to be purchased in the name of one of executors to the instrument.

Q. 17.
Such instruments are not admitted in evidence, for any purpose. These instruments are also treated as not properly stamped. These instruments are liable to be impounded and sent to the Collector of Stamps for recovery of proper stamp duty.

Q. 18.
The rates of stamp duty on instruments relating to transfer of immovable property vary from place to place. The rates are specified in Article 25 of Schedule 1 appended to the Bombay Stamp Act, 1958. However, Article 25 (d) which deals with the instruments of transfer of residential premises in Co-operative Housing Society or where the provisions of Maharashtra Ownership Flats Act 1963 and the Maharashtra Apartment Ownership Act, 1970 apply provides for levy of concessional rates of Stamp duty. In areas, where the provisions of the aforesaid Acts apply, residential premises up to market value of Rs. 1,00,000/- attract such concessional rates. Instruments relating to the transfer of residential premises of market value of more than Rs. 1,00,000/- attract normal rates of stamp duty for values over and above Rs. 1,00,000/- as applicable in that area. Such normal rates are 8 %, 6%, 3 %, 5 %. Etc. depending on where the property is situated.

Q. 19.
In addition to recovery of deficit Stamp duty in such cases, the concerned party is required to pay penalty of Rs. 250/- plus 15 % interest for each year or part of the year on the deficit amount from the date of presentation of instrument before the Sub-Registrar.

Q. 20.
The parties can go in appeal to the Chief Controlling Revenue Authority, Maharashtra State, Pune. Under section 32 B of Bombay Stamp Act, 1958.

Q. 21.
The chargeability of stamp duty on the instrument as determined by the Collector of Stamps is not final. The person affected by the order of the Collector of Stamps can go in appeal to the Chief Controlling Revenue Authority, Maharashtra State, Pune as provided in section 53 of the Bombay Stamp Act, 1958; limit prescribed for the filing of an appeal is within 60 days.

Q. 22.
Section 28 of the Bombay Stamp Act, 1958 casts the duty on the executants to disclose and truly set forth relevant facts and circumstances in the instruments. This helps in finding out the types of transactions involved in the instruments which in turn helps in the determination of proper stamp duty payable on such instruments. Duty is not payable on the title or the heading given on the top of the instrument but on the recitals as stated in the instruments.

Q. 23.
Yes, Refund can be claimed v/s 47 of The Bombay Stamp Act 1958. However such claim can be made to the collector of Stamps within a period of 6 months from the date of purchase of Stamps

Q. 24.
Every person having by law or consent of parties authority to receive evidence and every person in charge of public office before whom any instrument chargeable with stamp duty is produced or comes in the performance of his functions. Shall if it appears to him that instrument is not duly stamped, impound the same, irrespective whether the instrument is not valid in law. Such impounded document is required to be forwarded to the Collector of Stamps for recovery of deficit stamp duty in addition to penalty at the rate of 2 % per month.

Q. 25.
No. Stamp duty cannot be paid in settlements, various chambers Associations have made suggestions and representations to the stamp authorities in this regard. However till date no effort is made by the Stamp authorities towards implementation of the same.

Q. 26.
The original purchaser will be liable to pay stamp duty on the fair market value prevalent at the date of the document as determined by the Stamp authorities as stamp duty is paid on each transaction. However, the reply is subject to the confirmation of the Hon’ble Supreme court of India. In the question under consideration in my opinion person is responsible to pay stamp duty on only his own purchase transaction and hence the second purchase in my opinion will not be liable to pay the unpaid stamp duty of the first purchaser.

Q. 27.
For the purpose of determination of True Market Value, the Built-up area is taken into account.

Q. 28.
Yes. As per the provisions of Bombay Stamp Act, Stamp duty will have to be paid on a deed of family settlement.

Q. 29.
Yes. Stamp duty will have to be paid if the flat is gifted by the donor.

Q. 30.
Yes, after the amendment of Article 25 of the Bombay Stamp Act. The definition of conveyance has been widened, in view of the amendment decree or final order of the court by which immovable property is transferred is liable to be stamped as a conveyance.

Q. 31.
The parties can themselves decide who shall pay the stamp duty. If nothing is mentioned in the agreement then as per section 30 of the Bombay Stamp Act, 1958 if the transaction relates to resale of flats then the stamp duty will have to be paid by the purchase.

Q. 32.
Yes, after the amendment made in 1993, the preview of Article 25 (d) has been widened so as to bring orders made by the High Court under section 394 of the Companies Act, 1956. In respect of amalgamation of companies. Therefore stamp duty as on a Conveyance will have to be paid on such orders.

Q. 33.
As per section 34 of the Bombay Stamp Act, 1958 the stamp papers should be in the name of one of the parties who has signed the documents. Therefore the stamp paper should be purchased in the name of one of the parties who would be signing the instruments. If the stamp paper has been purchased in the name of an Advocate, C.A., etc than such instrument shall be treated as an instrument not duly stamped and shall be inadmissible in evidence.

Q. 34.
As of today there are 62 kinds of documents each one signifying a separate kind of deed. These are as follows: (numbers in italics indicate the serial no. of support documents required from the support document list furnished below; absence of number indicates that no support documents are required).
1.       Acknowledgement
2.       Administration
3.       Bond
4.       Adoption Deed
5.       Affidavit
6.       Memorandum of an Agreement.
7.       Agreement relating to deposit of Title deeds, pawn, pledge or hypothecation
8.       Appointment in execution of power
9.       Appraisal or Valuation
10.   Apprenticeship Deed
11.   Articles of Association of a company
12.   Articles of clerkship
13.   Award Bond
14.   Bottomory Bond
15.   Cancellation
16.   Certificate of sale
17.   Certificate or other document
18.   Charter Party
19.   Clearance List (purchase or sale of Government Securities)
20.   Clearance List (purchase or sale of cotton)
21.   Clearance List (purchase or sale of bullion)
22.   Clearance List (purchase or sale of oil seeds)
23.   Clearance List (purchase or sale of yarn)
24.   Composition Deed
25.   Conveyance ( 1,2,3,4,5,6)
26.   Copy or Extract
27.   Counterpart or Duplicate
28.   Customs Bond or Excise Bond.
29.   Delivery Order
30.   Divorce
31.   Entry or memorandum of marriage.
32.   Exchange of property (1,2,3,4,5,6)
33.   Further charge
34.   Gift (1,2,3,4,5,6)
35.   Indemnity Bond
36.   Lease (1,2,3,4,5,6)
37.   Letter of allotment of shares
38.   Letter of license
39.   Memorandum of association of a company
40.   Mortgage Deed (1,2,3,5,6)
41.   Mortgage of crop
42.   Notarial Act
43.   Note or Memorandum
44.   Note of protest by master of ship
45.   Order for the payment of money
46.   Partition (4,5,6)
47.   Partnership
48.   Power of Attorney
49.   Protest of Bill or Note
50.   Protest of the master of ship
51.   Reconveyance of mortgaged property
52.   Release (1,2,3,4,5,6)
53.   Respondentia Bond
54.   Security Bond or Mortgage Deed (1,2,3,5,6)
55.   Settlement (1,2,3,4,5,6)
56.   Share Warrants
57.   Shipping Order
58.   Surrender of Lease (1,2,3,4,5,6)
59.   Transfer (1,2,3,4,5,6)
60.   Transfer of Lease (1,2,3,4,5,6)
61.   Trust (1,2,3,4,5,6)
62.   Warrant of goods.
Documents can also be classified as Testamentary and Non Testamentary depending upon the time when they come into force. E.g. Will is of testamentary type because it doesn’t come into force immediately whereas a sale deed is a non-testamentary document since it has immediate effect. On the same lines, some documents have to be compulsorily registered e.g. a sale or lease deed while registration for some is optional e.g. affidavit.

Q. 35.
For registration purpose, some of the above documents should be accompanied by one or more support documents. The list of support documents is as follows:
1.         Income Tax clearance certificate under 230 A-1 (ITC) Act 1961.
2.         Income Tax certificate 269 UL (37I) Act 1961.
3.         Permission under Urban Land Ceiling Act 1976, section 26.
4.         Bombay Stamp Act 1958, section 32 A.
5.         Bombay Stamp Act 1958, section 33.
6.         Registration Act 1908 sections 25 and 34.

-      Adv. R. P. Rathod.