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Stamp Duty

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Stamp duty is a government tax in India on trading in stocks, currency derivatives and commodities. It is collected by the stockbroker for issuing stamped contract notes at the end of the day.
Stamp Duty definition

Stamp duty is charged on trading in stocks, currency derivatives and commodities in India. The stamp duty is a tax that is levied while issuing, selling or transferring the stocks, debentures, currency derivatives, and commodity instruments. The tax is collected for providing a stamped contract note to the traders at the end of the day.

Note: Amendments were made in the Indian Stamp Act, 1899 in the Finance Bill, 2019 (applicable from 1st April 2020) by introducing uniform stamp duty for the stock market investor's across India.

Note: The below charges will be applicable from 1st April 2020. Until then state wise stamp duty will continue.

Stamp Duty for Stock Trading

Trading Segment

Stamp Duty Rate

Equity Delivery

0.015% (₹1500 per crore) on buy-side

Equity Intraday

0.003% (₹300 per crore) on buy-side

Futures (equity and commodity)

0.002% (₹200 per crore) on buy-side

Options (equity and commodity)

0.003% (₹300 per crore) on buy-side

Currency

0.0001% (₹10 per crore) on buy-side

Stamp Duty on Off-Market Share Transfers

Transaction

Stamp Duty Rate

Transfer and re-issue of debentures

0.0001% (₹10 per Crore)

Transfer of security on the delivery basis

0.015% (₹1500 per Crore)

Transfer of security on non-delivery basis

0.003% (₹300 per Crore)

Key Changes in the Stamp Duty Laws for Securities

Following are the key changes applicable from 01st April 2020:

  1. If several instruments are issued, sold or transferred, then only the principal instrument (applicable for stamp duty) will attract stamp duty. No other instruments in the transaction will be affected by stamp duty.
  2. Previously, no stamp duty was levied on the transfer of securities in dematerialized form. Now, the securities will attract stamp duty for transfer of securities even in dematerialised form.
  3. Sale of delivery or non-delivery based stocks through stock exchanges will attract stamp duty from the Buyers.
  4. For off-market transactions through depositories for listed or unlisted securities transfer including over the counter trades, Transferor/seller will be liable to pay stamp duty. The transfer of shares at the time of gifts, inheritance and transactions in unlisted securities are also considered as off-market transactions.
  5. Stamp duty will be charged on the issuance of Stocks, Debentures, Equity Derivatives, Currency Derivatives, and Repo of corporate bonds.
  6. Issuance, sale or transfer of securities in physical form will levy the stamp duty on the market value and payable by the issuer in the state where it resides.

Benefits of Latest Stamp Duty Charged

  • Uniformed stamp duty rates across all the states in India.
  • The new rates are applicable only on buy side and not on sell side.
  • The stamp duty rate for currency and interest rate derivatives have been reduced significantly from ₹400 per ₹1 crore to ₹10 per ₹1 crore.
  • The unified system removes ambiguity on stamp duty rate across different states.
  • The operational burden is reduced for brokerage firms.
Answered on

FAQ's

  1. 1. How Stamp Duty is collected?

    Any issuance, transfer or sale of securities (through exchange or off-market) attracts stamp duty in India. It is collected by the Stock Exchanges, Depositories or Clearing Corporations.

    The clearing corporation, stock exchanges, and depositories collect the stamp duty and transfer it to the Central Government within three weeks of each month.

    Note: The stamp duty from buyers or allottees of securities will be collected by the authorities within the states where buyers reside.

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  2. 2. Who pays the stamp duty for stock transactions?

    Here is the table mentioning the stamp duty charges paid by the buyer or seller:

    Transaction

    Who will pay stamp duty?

    Sale of securities on the stock exchange

    Buyer

    Sale of Securities through offline markets

    Seller

    Transfer of security

    Transferor

    Issue of security

    Issuer

    Other Cases- making, drawing, or executing instruments

    Concerned Trader

    Note: Previously, stamp duty was paid by both the buyers and sellers of the stock transactions. Now, only investors buying stocks have to pay stamp duty. The seller of the securities will not pay any stamp duty.

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  3. 3. Who collects the stamp duty for stock transactions?

    As per the new amendments applicable from Jan 09, 2020, the following entities will collect the stamp duty on certain transactions:

    Transaction Type

    Authority collecting Stamp Duty

    Sale of securities (through a stock exchange)

    Stock exchanges

    Transfer of securities (through a depository)

    Depository

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  4. 4. Which types of stocks transactions attract stamp duty?

    Here are the two transactions which attract stamp duty for stocks:

    • Sale or transfer of Stocks
    • Issuance of Stocks

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  5. 5. Does government securities attract stamp duty?

    No, government securities are exempted from stamp duty. Buying and selling of Government Securities will not attract any stamp duty charges.

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