Investing in stock market has always been a point of interest because of high rates of return. Though due to high rate of risks as well combined with the investment, there are equal chances of high loss or high gain. In either case the stamp duty is levied on the transfer of shares. Stamp Duty is levied by the Central Government as per Indian Stamp Act, 1899.
Stamp Duty is a tax levied on the transfer of shares ( or other documents). Earlier physical stamp was attached or impressed as a proof of the legal transfer of documents. But now a days due to dematerialization, the online formats are available. But for the physical form of share transfer, the share transfer deed is to be submitted to company or registrar and the agent and hence the physical stamp is also necessary.
The frequently asked questions regarding stamp duty
How much stamp duty is paid on the transfer of shares?
Stamp Duty is levied at the rate of 0.25% of consideration i.e. the amount to be paid is 25 paise for a share transfer of Rs. 100. If required, the total amount of stamp duty will be rounded off to next or upper 5 paise. Though there is no stamp duty on transfer of shares or debentures in a depository scheme.
Is stamp duty calculated on market value or face value? What if the consideration amount is less than market value?
The stamp duty is calculated on market value of the shares on the date of execution of transaction. It is not calculated on face value. If the consideration amount and market value are different, it will calculated on larger value.
Is stamp duty paid in case of share transfer as a gift?
Transfer of shares as gift in the demat form does not attract any stamp duty. Whereas the stamp duty will be charged on the transfer of shares in the physical form even as gift. It will be at the same rate of 0.25%. Since, there is no consideration value for the gift transfer, the stamp duty is calculated on the market value on the date of transfer. The stamp duty is indifferent for the gift transfer to spouse or other relatives. Also, it is optional to register a gift deed for share transfer as per Indian Registration Act, 1908.
What if the higher or lower stamp duty is paid?
The company may not accept the documents if the stamp duty has been paid less. Whereas if the amount paid is more, it will not be refunded as the stamp is impressed. Though in the transfer through demat account, no physical stamp is required and amount is directly transferred from the account. So, the miscalculations do not take place.