Uniform Stamp Duty on Capital Market Transaction

Uniform Stamp Duty on Capital Market Transaction

The Stamp Act, 1899, was amended vide the Finance Bill, 2019, introducing the application of Uniform Stamp Duty for all the financial securities transactions. The said amendment was earlier going to be effective from 9th January 2020 but was later shifted to 1st April 2020. However, due to the occurrence of pandemic COVID-19 and subsequent lockdown, the date of implementation was further extended to 1st July 2020.

As per the earlier position, the different states were allowed to collect different stamp duty rates. Noticeably, the previous system of stamp duty collection led to multiple rates for the same instrument, which resulted in multiple incidences of duty. Importantly, the stamp duty used to be levied on both the buyer and the seller.

From 1st July 2020, the stock exchanges will collect the stamp duty for trading in securities at a unified rate. Further, the stamp duty will be collected only from the buyer of the securities. The stock exchanges will deposit the proceeds with the Centre, and the Centre will eventually divide amongst the states where the trade has taken place.

The new harmonized, rationalized, and centralized stamp duty collection system, with unified rates, will minimize collection cost and enhance the productivity of revenue however, the same will turn out to be a little bit expensive for the buyers. The present article highlights the said system of uniform stamp duty on capital market transactions.

Applicable rates for different capital market instruments

The implementation of the uniform stamp duty will be applicable on the transfer of shares, debentures, future, currency, options, and other capital market instruments. The rates applicable for different capital market instruments are tabulated hereunder-

Sr. No.InstrumentApplicable rate
1Issue of security (other than debentures) including units of mutual funds0.005% or INR 500 per crore on buy-side
2Transfer of security on the delivery basis (other than debentures) including the transfer of units of mutual funds0.015% or INR 1500 per crore
3Transfer of security on non-delivery basis (other than debentures)0.003% or INR 300 per crore
4Derivatives – Futures (commodity and equity)0.002% or INR 200 per crore on buy-side
5Derivatives – Options (commodity and equity)0.003% or INR 300 per crore on buy-side
6Interest rate derivatives and OTC currency0.0001% or INR 10 per crore on buy-side
7Other derivatives0.002%
8Repo on corporate bonds0.00001%
9Delivery equity traders (equity delivery)0.015% or INR 1500 per crore on buy-side
10Intraday equity traders (equity intraday)0.003% or INR 300 per crore on buy-side
11Bonds0.0001% or INR 10 per crore on buy-side

It is important to note that the rate applicable for Government securities is 0%.

Conclusion

With effect from 1st July 2020, unified rates will be levied, across the country, on all the capital market transactions. Stock exchanges or authorized clearing corporations and the depositories will now become the collecting agents. Further, unlike erstwhile practice, now, only the buyer of the securities will be liable to pay the stamp duty.

Issue and re-issue of debentures, transferring any equity and equity related securities, transferring debenture against off-market trade or delivery trades are some of the new segments which will now attract stamp duty.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.