This article has been written by Arkodeep Gorai, a 4th year student from Amity Law School, Noida. In this article he discusses about the Indian Stamp and Registration Act.
Throughout our lives, we come across various levels and types of transactions and documents. Some of these documents and transactions are of massive importance to us and the State. Without any mechanism of their regulation, it would be troublesome to keep a track of such transactions.
For this reason, the State introduced the process of registration. Now once this mechanism was sorted State also wanted to gain some form of revenue from such transactions and documents and in order to gain that revenue State introduced the system of stamp duty.
Indian Stamp Act, 1899
Indian Stamp Act was amended in 1899 by the British Government with the sole purpose of acting as a revenue-generating mechanism for the Government. This Act imposes liability to pay stamp duty on certain and specific documents. Indian Stamp Act acts as fiscal legislation.
Objectives of the Stamp Act, 1899
- The main purpose of this Act is to generate revenue for the Indian government.
- A document which is stamped acts as valid evidence in a court of law.
- The Stamp Act also makes payment of stamp duty on some documents compulsory which in return makes those documents legally valid and authentic.
The tax payable on a certain and specific document is termed as stamp duty. Stamp duty can be fixed or varied based on the value of the product.
Basically, stamp duty is a tax which is paid on the exchange of documents or execution of instruments.
There are basically two kinds of stamp duty and they are:
- Impressed stamp- An impressed stamp is produced by the process of engraving or embossing. The labels in impressed stamps are affixed and these impressions are done by franking machines in the bank.
- Adhesive stamp- Adhesive stamps are those stamps which can be stuck to a document using any form of adhesive. There are two types of adhesive stamps and they are:
- Postal stamps- Postal stamps have their limited application. Postal stamps are used for post office related transactions.
- Non-postal stamps- Non-postal stamps have wider application compared to postal stamps. Non-postal stamps are revenue stamp, court fee stamp, insurance policy stamp etc.
There are certain very important terms that are related to The Indian Stamp Act, 1899. It is important for us to be aware of those terms and they are:
- Conveyance- Section 2 (10) of the Act defines the term conveyance. It basically includes an instrument by which property is transferred. It applies to both movable and immovable property. Sale deed, transfer of lease, release, settlement are all chargeable as conveyance.
- Duly Stamped- Section 2 (11) defines this term. It means that the instrument bears the adhesive or impressed stamp, not below the amount essential by law and further no violation to the manner prescribed by law. The amount of stamp to be used is governed by provisions and schedule to the Stamp Act. The manner of stamping is governed by section 10 to 19 of the Act and also by the rules framed by the Government. Under this head are included particulars as to the description of state ps and the number of stamps to be used. Thus an instrument which is to be written on paper with an impressed stamp is not duly stamped if it bears only an adhesive stamp of the value and vice- versa.
- Instrument- Section 2(14) defines the term instrument. So instrument means any document through which any right, liability is created, transferred, extended or extinguished. A document which helps to record such rights and liability even though the document itself does not create such right or liability can also be termed as an Instrument.
- Instrument chargeable with duty- All the instruments mentioned in the schedule are chargeable with duty of amount as mentioned in the Act. The exception to charges is an instrument which is executed by the government or executed for the purpose of Special Economic Zone.
Valuation of Instrument for levy of stamp duty
As we already know that Instruments are chargeable with duty but then it raises another question and that is how is the valuation of instruments is done, the answer to that question is from Section 20 to Section 27 excluding Section 22 of The Indian Stamp Act.
- Section 20 of the Act states that where an instrument is chargeable in respect of money in any currency other than that of India then, in that case, the duty shall be calculated on Indian currency and the exchange rate shall be applicable on the date of the instrument.
- Section 21 provides that where an instrument is chargeable with ad valorem duty in respect of stock, securities then, in that case, the value of the day is calculated by the average price of the stock or security in the day of the instrument.
- Section 23 deals with interest, it states that where interest is payable by the terms of an instrument in such a case the value of the duty shall not exceed the charge by which it would have been initially chargeable.
- Section 24 states that duty is also payable on the amount of debt when a property is transferred wholly or partially.
- Section 25 talks about the computation of duty in the case of annuity and it is as follows:
- When the annuity payable is for a definite period and a certain amount then, in that case, it is the total amount.
- When the annuity payable is for an indefinite period or in perpetuity and a certain amount then, in that case, it is the amount payable in the first 20 years from the date on which the first payment becomes due.
- Section 26 states that where the instrument is chargeable with ad valorem duty but the value of the subject matter cannot be ascertained at the date of its execution, then, in that case, the executants can value the instrument as they please. However, they cannot recover under such a document any amount which is in excess of the amount of stamp duty that has been paid.
- Section 27 sets that parties of an instrument are bound to set forth all the facts and circumstances affecting the chargeability of an instrument.
By whom stamp duty is payable
Section 29 of the Indian Stamp Act provides for the person who is liable to pay the stamp duty. For various instruments, there are various people who are liable to pay the stamp duty and they are as follows:
- Administration bond agreement, pawn agreement, pledge agreement, bills of exchange, bonds- In such instruments the person who is drawing, making or executing such instrument is liable to pay the stamp duty.
- Lease agreement or agreement to lease- In such instruments, the lessee or the intended lessee is liable to pay the stamp duty.
- Certificate of sale- The purchaser of the property is liable to pay the stamp duty in case of a certificate of sale.
Evidentiary value of an instrument not duly stamped
Section 35 of the Indian Stamp Act does not allow an instrument chargeable with the duty to be admitted as evidence if it is not duly stamped, however, there are certain exceptions to this section and those exceptions are:
- Courts and arbitrators may admit documents which are unstamped or deficiently stamped on payment of proper duty and penalty.
- An unstamped receipt is admissible only against the person on whose fault the receipt was not stamped on payment of penalty of Rs. 1.
- When a contract has two letters attached and any one of those letters are stamped then in that case the contract will be treated as it is completely stamped.
Through modernisation, there has been an introduction of E-stamp or as known as an electronic stamp. E- stamp is basically an electronically generated stamp which can be used as a non-judicial stamp and can be used to pay stamp duty to the government.E-Stamping is a computer-based procedure and a secure manner for the state to pay non-judicial stamping duties.
Benefits of E-stamp
- E-stamps are less time-consuming.
- They are very easily accessible.
- They are cost saving.
- E-stamps are user-friendly.
Reference and Revision
Under the Stamp Act, if the collector is unsure about the amount of duty chargeable for the instrument then, in that case, the collector may draw up a statement of the case and refer it to the Controlling Revenue Authority.
The Registration Act, 1908
The Registration Act, 1908 was set up with the purpose of ensuring registration of documents and that all the important information related to deal regarding land or other immovable property. Having a document registered can add more authenticity to that of the document.
Objectives of the Registration Act, 1908
- Registration of a document ensures proper preservation and record of such document.
- Documents which are required to be registered act as valid evidence in a court of law.
- Registered documents assist in the prevention of fraud.
- Registration Act gives people information regarding legal rights and obligations arising or affecting a particular property.
Documents which are compulsorily registrable
There are certain documents which are compulsorily registrable. Section 17 of The Registration Act, 1908 lays down all the documents which are compulsorily required to be registered and those documents are:
- Instruments of the gift of immovable property.
- Leases of immovable property from year to year or any time frame exceeding one year.
- Non-testamentary instruments which acknowledge the payment of any consideration.
- Testamentary instruments which are transferring or assigning any decree or order of the court.
Documents in which registration is optional
All the documents that are not included in Section 17 of The Registration Act, 1908 have the option of the optional registration some examples would will or instruments related to movable properties.
Effect of registration
Section 47 and 48 of the Registration Act, 1908 notifies the effects of registration of a document. So the effect of registration are:
- Section 47 of the Act states that a registered document shall operate from the time it would have normally operated if there was no provision or procedure of registration.
- Section 48 states that all non-testamentary documents which are duly registered under this Act and relating to any movable or immovable property will take effect against any oral document relating to such a document unless where the agreement has been accompanied by the delivery of possession.
Effect of non-registration
Section 49 of the Registration Act, 1908 states the effects of non-registration of documents which are required to be registered. The effects are:
- Non-registration of a deed of adoption shall not grant any power to adopt.
- A document required to be registered which is not registered cannot be taken as evidence for the creation of any right, duty or liability of immovable property. That document simply becomes useless.
- Where a document is not registered then in such condition it cannot be allowed to affect an immovable property which the document comprises and it cannot be received as evidence of any form of transaction that is affecting such property.
Time limit for presentation of a document for registration
- A document other than a will must be presented for registration within four months of its execution.
- Section 24 of the Act states that when one document is executed by more than one person and the execution took place at different dates then, in that case, such document must be presented for registration within 4 months from the date of each execution.
- When a document is executed outside the territory of India, then, in that case, the document must be registered in India.
- These limits are mandatory but in case there is a delay on behalf of the court regarding registration or re-registration of a document then in that case these limits that are disregarded.
This article shows and highlights the importance of registration and payment of stamp duty. These two process makes a document much more authentic and allows them to function smoothly without any hindrance. The Stamp Act, 1899 and The Registration Act, 1908 lay down all essential amendments that show the importance of registering and paying stamp duty for a document.