Stamp Duty in case of Transfer of Share by way of Gift
The purposes of making this note are:
- To provide basis of not charging stamp duty on the Share Transfer form, wherein Shares are transferred by way of gift.
- To clarify the provisions of the Indian Stamp Act 1899, on the basis of which, the management has taken decision of not charging Stamp Duty on the Share Transfer Form.
Yours views are solicited on the relevant extract of the Amended Indian Stamp Act, 1899, which are reproduced below:
“Section 21. Stock and marketable securities how to be valued. —Where an instrument is chargeable with ad valorem duty in respect of any stock or of any marketable or other security, such duty shall be calculated on 2[the market value of such stock or security.]
“Section 9B. Instruments chargeable with duty for transactions otherwise than through stock exchanges and depositories.— Notwithstanding anything contained in this Act,—
(b) when any sale or transfer or reissue of securities for consideration is made otherwise than through a stock exchange or depository, the stamp-duty on each such sale or transfer or reissue shall be payable by the seller or transferor or issuer, as the case may be, on the consideration amount specified in such instrument at the rate specified in Schedule I.]”
And the term “Market Value” is defined under Section 2 (16B) as:
Section 2 (16B) Market value.—“market value”, in relation to an instrument through which—
(c) any security is dealt otherwise than in the stock exchange or depository, means the price or consideration mentioned in such instrument;]”
In the absence of a specific provision for market value in case of transfers without consideration, it seems that such transactions would not be subject to stamp duty in the absence of any other instrument of transfer. The Government of India has issued frequently asked questions (FAQs) (mentioned below) for the implementation of amendments in the Act and the Rules made thereunder. Questions 15 and 24 of the FAQs clarify that no stamp duty is payable in relation to transactions without consideration, i.e., gift, bonus shares, transmission of securities, etc.
F&Q’s issued by the Government of India are Given Below:
- Whether stamp duty will be charged on off-market transfer of securities without consideration such on gift, legacy transfer etc.?
Answer: No. Section 21 of the Amended Indian Stamp Act read with sub-section 16B of Section 2 clearly indicates that stamp duty is to be collected on market value which is based on price or consideration involved.
- Whether stamp duty is applicable on bonus issue of shares?
Answer: In case of bonus issue, there is no consideration which means bonus shares are issued free to existing shareholders. Section 21 of the Amended Indian Stamp Act read with sub-section 16B of Section 2 clearly indicates that stamp duty is to be collected on market value which is based on price or consideration involved.
From the above, we can say that the consideration amount is NIL. Hence, no Stamp Duty would be charged on the Share Transfer Form.
Please find enclosed Government FAQ, wherein it was mentioned that there will be no stamp duty in case of transfer of share by way of gift.
For more information, feel free to contact us.
CS Aarti Kumari