Uniform Stamp Duty Applied from July 01: Things Investors Need to Know

Uniform Stamp Duty Applied from July 01

According to a Press Conference released by the Government on Tuesday, June 30, 2020, there will be the implementation of the uniform stamp duty on transfer of shares, debentures, futures, options, currency, and other capital market instruments from July 01, 2020. The government has introduced the changes in the Stamp Duty Act, 1899 last year and decided to implement in the January month of this year but the government measure postponed twice before the recent notification issued yesterday.

The provision has come into effect now, according to which, the stamp duty will have to be paid by either buyer or seller of financial security. With this, the current practice of levying the duty on both will no longer work. Earlier, the system of collection of stamp duty on securities market transaction led to multiple rates for the same instrument, which resulted in multiple incidences of duty.

Earlier, the rates of stamp duty were varying with states. But, now the rates of stamp duty will be uniform across the country. The new implementation will benefit the states with high stamp duty rates as the rates will be uniform now. On the other hand, the states that levied very low rates on speculative trades will have to pay more.

Earlier  State-wise Stamp Duty Rates Applicable in Trading

No. State Equity Intraday Equity Delivery Futures Options Currencies Currencies Commodities
1 Andhra Pradesh 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day
2 Arunachal Pradesh 0.003% 0.003% 0.003% 0.003% 0.003% 0.003%
3 Assam 0.018% – max Rs. 49.5/day 0.018% – max Rs. 49.5/day 0.018% – max Rs. 49.5/day 0.018% – max Rs. 49.5/day 0.018% – max Rs. 49.5/day 0.018% – max Rs. 49.5/day
4 Chhattisgarh 0.002% 0.01% 0.002% 0.002% 0.002% 0.001%
5 Delhi 0.002% 0.01% 0.002% 0.002% 0.002% 0.001%
6 Goa, Daman & Diu 0.005% 0.005% 0.005% 0.005% 0.005% 0.005%
7 Gujarat 0.002% 0.01% 0.002% 0.002% 0.002% 0.001%
8 Haryana 0.002% – max Rs. 500 0.01% – max Rs. 500 0.002% – max Rs. 200 0.002% – max Rs. 200 0.002% – max Rs. 200 0.002% – max Rs. 500
9 Kerala 0.002% 0.01% 0.002% 0.002% 0.002% 0.001%
10 Karnataka 0.003% 0.003% 0.003% 0.003% 0.003% 0.003%
11 Madhya Pradesh 0.002% 0.01% 0.002% 0.002% 0.002% 0.002%
12 Maharashtra 0.002% 0.01% 0.002% 0.002% 0.002% 0.001%
13 Meghalaya 0.003% 0.003% 0.003% 0.003% 0.003% 0.003%
14 Orissa 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day 0.005% – max Rs. 50/day
15 Rajasthan 0.003% 0.012% 0.0012% 0.0024% 0.0012% Agri: 0.0006% Non Agri: 0.0012%
16 Tamil Nadu 0.006% 0.006% 0.006% 0.006% 0.006% *30 paisa for every unit of Cotton, Kapas, Pods *10 paisa for every unit of Kilo of Silver *50 paisa for every unit of Kilo of Gold *50 paisa for every unit of 25 Metric tones of Groundnut, Lineseed, Castor Seed, Cotton Seed *For any Yarn,non mineral oil, spices, Hydrosulphide soda: 0.004% *No Stamp Duty for Crude Oil and Base Metals
17 Telangana 0.01% – max Rs. 100/day 0.01% – max Rs. 100/day 0.01% – max Rs. 100/day 0.01% – max Rs. 100/day 0.01% – max Rs. 100/day 0.01% – max Rs. 100/day
18 Uttar Pradesh 0.002% – max Rs. 1000/day 0.002% – max Rs. 1000/day 0.002% – max Rs. 1000/day 0.002% – max Rs. 1000/day 0.002% – max Rs. 1000/day 0.002% – max Rs. 1000/day
19 West Bengal 0.002% 0.01% 0.002% 0.002% 0.002% 0.002%
20 Other State 0.002% 0.01% 0.002% 0.002% 0.002% 0.001%

What are the Changes in Stamp Duty?

  • Previously, there was no stamp duty on off-market transactions in Demat mode. This involved the buying and selling of unlisted shares as well as other kinds of off-market transactions such as the gift of financial securities. The new implementation of uniform stamp duty will address such loopholes in the earlier system.
  • According to a press release, the earlier stamp duty that was payable by both buyer and seller is now levied to only on one side which would remove the double imposition of stamp duty.
  • The new uniform stamp duty rates will ease the burden on brokers who had to register with different states and collect and pay stamp duty to them. With the new system, the exchanges will do payment on behalf of brokers.

New Unified Stamp Duty Rates across India Applied from July 01

Types of Trade New Stamp Duty Rate
Equity Delivery 0.015% or Rs. 1500 per crore
Intraday Equity Trades 0.003% or Rs. 300 per crore
Futures (equity and commodity) 0.002% or Rs. 200 per crore
Options (equity and commodity) 0.003% or Rs. 300 per crore
Currency 0.0001% or Rs. 10 per crore

What do MF Investors need to Know?

  • In case of mutual funds, the stamp duty will be on the purchase amount minus any other charges including a transaction charge. That means, a unit purchase of Rs. 50,000 with a transaction charge of Rs. 100, the stamp duty of 0.005 per cent will be applicable on purchased amount excluding the transaction charge.
  • A 0.015 per cent will be implied on on-& off-transfer of mutual fund units.
  • Stamp duty will not apply to the redemption of units.
  • In the case of dividend re-investment, the stamp duty will be imposed on the dividend amount minus TDS.

The new system of uniform stamp duty rates will ultimately give clarity on various aspects of the amendments made to the Indian Stamp Act. With the previous system, there was always this question whether the stamp duty would be paid to the state where is the client is located or broker is situated.

The new notification clarifies that the stamp duty will be payable to the state in which the client and specifically the buyer is located.

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