Stamp Duty

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:

• The stamp duty is applicable only on buy side and not on sell side.
• In case of shares transfer through DIS, the delivery stamp duty i.e 0.015% shall be applicable.
• Stamp duty on Mutual Funds is applicable on all fresh purchases including monthly SIPs, Lumpsums, STPs, dividend reinvestment.
• Stamp duty on Mutual Funds is applicable if an investor transfers units from one demat account to another.

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 Rs 400 per Rs 1 crore to Rs 10 per Rs 1 crore.
• The unified system removes ambiguity on stamp duty rate across different states.
• The operational burden is reduced for brokerage firms.

Answered on 2020-07-01