Stamping of Shares

Pay Stamp Duty on Issue and Transfer of Shares

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What are Share Certificates

What are Share Certificates.

Share certificate is a written document that is issued by a Company evidencing that a person named in that certificate is the owner of the company’s shares. As per Companies Act, companies are required to issue share certificate post their incorporation.

What are Share Certificates

Payment and collection of Stamp Duty.

The mechanism for payment of stamp duty on the demat securities has drastically been changed. The stamp duty shall now be collected by the stock exchanges, depositories or clearing corporations and stamp duty so collected, shall be remitted to the accounts of respective State Governments.

What are Share Certificates

Rate of Stamp Duty.

The Central Government notified the Indian Stamp (Collection of Stamp Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 with effect from 1st July 2020. After amendment the rate of stamp duty on issue of share certificate will be 0.005% for all state of the India and the rate of stamp duty on transfer of demat as well as physical share will be 0.015% on total consideration for all state if India.

Time Limit for issuance of share certificate .

After the incorporation of the company, the company needs to issue the share certificates within two months from the incorporation date. Where additional shares are allotted to the new or existing shareholders, the share certificates should be issued within two months from the allotment date.

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WHAT IS STAMPING OF SHARES?

As per Indian stamp act, every share certificate must bear the necessary stamp duty. Stamp duty on share certificate is a state matter and delay in payment of stamp duty attracts penalty. Stamp duty is to be paid first at the time of incorporation on share certificate issued to the subscribers and thereafter on every further allotment of shares.

WHY STAMPING OF SHARES IS REQUIRED?

Stamping is a tax on the documents executed in India, share Certificates comes under the definition of Instrument, hence it is liable to be stamped as per the government specifications and stamping provides the legality to the document.

IN HOW MANY DAYS STAMPING OF SHARES TO BE DONE?

As per Indian stamp Act, within 30 days of issue of share certificates, stamp duty shall be paid.

WHAT ARE THE PENALTIES IN CASE OF NON PAYMENT OF STAMPING OF SHARES?

The superintendent (SDM) has the power to put penalty, 10 times of the amount of stamp duty. Also If the matter got delayed due to any reason and an application filed is beyond 30 days then the matter will directly be called for hearing.

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Documents Required For Stamping of Shares

Proprietor
One Person Company
Private Limited
  • Signed Share Certificate
  • Company COI, MOA and AOA
  • Form PAS-3 along with Payment receipt filed with ROC
  • List of Subscribers/ List of Allottees
  • Board Resolution for Allotment of Shares
  • Board Resolution to issue share Certificate and authorization fro stamp duty payment
  • List of Directors
  • Certificate of Practicing Professionals to whom the power is given to pay stamp duty
Public Limited
Partnership Firm
LLP
NGO

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Frequently asked questions

As per the Indian Stamp Act, Stamping of shares means payment of stamp duty on issuance of share certificates. Whenever Companies make allotments, whether its first allotment or subsequent and issues shares, the Company must pay stamp duty on the total consideration involved in each allotment and Stamp duty on share certificate is a state-related matter.

1. stamping provides the legality to the documents that are executed in India. 2. properly stamped documents are admissible as evidence in the court of law.

Sec. 3 of Indian Stamp Act, 1899 states that every instrument mentioned in the schedule of the Indian Stamp Act, 1899 is chargeable with adequate stamp duty and Article 19 of Schedule IA of the Indian Stamp Act, 1899 talks about the payment of stamp duty on the instrument evidencing the right or title of the holder thereof or any other person to any share or stock in any incorporated company or body corporate.

Rs. 1/- for every Rs. 1000/- or part thereof of the value of the share including amount of premium.

Within 30 days of the issuance of the share certificate, stamp duty shall be paid.

If the share certificates are not stamped within the prescribed time, then the company shall face the following consequences: • Heavy penalty will be imposed by the department which may extend to 10 times of the amount of duty. • The company may not be eligible to apply for tenders as some government authorities ask for stamped share certificates. • The legality of the share certificate cannot be proved in case of disputes or fraud.

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