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Stamp Duty Matters

There are so many doubts on the subject of payment stamp duty. How to pay? When to pay? Whom to pay? What are the different methods to pay? Etc. We would like to make it simple.

Indian Stamp Act, 1899 prescribes that the stamp duty has to be paid before or at the time of execution of instrument. Execution means signing of the document in question. So, it is clear that the stamp duty has to be paid before signing of the document since it is not practically possible to pay while signing the document.

Payment of stamp duty in respect of documents to be registered:

Before the infamous Telgi scam, in the State of Andhra Pradesh and Telangana, the Government through its treasuries, Sub Registrar Offices and licenced Stamp Vendors used to sell non-judicial stamp papers denominations up to Rs.25000/-. The parties used to buy the stamps from these sources and documentation was done using these non-judicial stamps. After the scam, the Government thought it appropriate to minimise the circulation of high valued stamps, and introduced challan system. Now, in Andhra Pradesh and Telangana, the non-judicial stamp papers are available in the denomination of Rs.10/-, 20/-, 50/- and 100/- only. The parties shall use these stamp papers to document their transaction and remaining stamp duty shall be paid through challan system. Presently, each Sub Registrar Office is attached with either State Bank of Hyderabad (Telangana region) or State Bank of India (Andhra and Rayalaseema regions) branches. People required to pay the stamp duty have to go to Sub Registrar Office concerned to know the exact amount to be paid. The Sub Registrar Office will give guidance with regard to how to fill the challan (pay-in form) and how much amount the party has to pay under various head like stamp duty, transfer duty registration fee, user charges etc. The party then go to the designated branch of that particular office and pay the amounts and get a copy of the challan. He produces such copy of challan along with the document to be registered. Sub Registrar accepts the document on the strength of the challan and registers the document and verifies on the same day evening with the bank scrolls furnished by the concerned bank.

How to pay stamp duty on old documents (validation/impounding):

  • Within one year from the date of signing of instrument/document: As per Indian Stamp Act, 1899, the parties can come forward to pay the deficit stamp duty on the instrument/document within one year from the date of execution (signing). If the parties pay the stamp duty within one year voluntarily and approaches the Collector (District Registrar in the State of Andhra Pradesh and Telangana), then the District Registrar will collect the deficit stamp duty only; and will not levy any penalty. This provision allows the parties to pay the stamp duty without any penalty if they come forward to pay the deficit stamp duty within a year from the date of signing of the document.
  • After one year from the date of singing of instrument/document: If any deficitly stamped instrument/document is presented before any public officer or civil court, then such public officer or court will impound (hold) the instrument. Such instrument will not be taken as evidence unless proper stamp duty is paid along with the penalty. The courts should collect 10 times of penalty. Suppose if the deficit stamp duty on the instrument is Rs.10000/-. The court shall collect Rs.10000/- (deficit stamp duty) + Rs.100000/-(one lakh) being 10 times of deficit stamp duty. But, the courts will allow the parties to approach the Collector (in Andhra Pradesh and Telangana, all the District Registrars are declared as Collectors under Indian Stamp Act) to present these deficitly stamped instruments/documents and get them adjudicated. The Collector got the discretionary power to levy a penalty minimum of Rs.5/- and the maximum of 10 times of the deficit stamp duty. Recently, the Commissioner and Inspector General of Registration and Stamps gave instructions to all the District Registrars to levy a minimum of 3 times penalty on the impounded instruments. Suppose, if there is a deficit stamp duty of Rs.10000/-, then the District Registrar will collect Rs.10000/- + Rs.30000/- (towards penalty). After collecting the deficit stamp duty and penalty, the Collector will add a certificate under Section 42 of Indian Stamp Act, 1899, which is equivalent to payment of stamp duty. Even though there is no word called validation in the Indian Stamp Act, 1899, the adjudication process and collecting process is called as such in courts and other places by the common public.

  • Documents signed outside India:

    Documents signed outside India and received in India can be stamped under Section 18 of Indian Stamp Act, 1899. Within three months from the date of first received in India, the parties may approach the District Registrar (in Andhra Pradesh and Telangana) and pay the proper stamp duty on the instrument/document. The District Registrar will collect the deficit stamp duty and either affixes a special adhesive label or frank the amount on the instrument.