Stamp Duty Issue On Share Certificates

Know About Issuance Of Stamp Duty On Share Certificates

Online Legal India LogoBy Online Legal India Published On 15 Sep 2022 Updated On 16 Sep 2022 Category Company Registration

A share certificate is a certificate of the type SH-1 that is delivered to an equity shareholder of the company. As an instrument, a share certificate needs to be stamped. Stamp duty on share certificates is a state-based issue, and there are penalties for paying stamp duty late. First, at the time of incorporation and then again for each further share allocation, stamp duty on share certificates must be paid.

A certificate of share is a printed, signed document that certifies the legal ownership of the stated number of shares.

Stamp Duty
 

When a share certificate is issued, the stamp duty becomes applicable. Prior to providing the share certificate to its shareholders, the corporation must make sure that the stamp duty has been paid in full.

A share certificate is not regarded as being legitimate until the stamp duty has been paid on it and a stamp on the paper indicating confirmation of the payment has been applied. Your specific Stamp Duty Act, which varies from state to state, specifies the stamp duty rate.

Shares issued in Demat form are subject to stamp duty:
 

The process for paying stamp duty while issuing shares through Demat has recently undergone major alteration. Due to the fact that depositories, clearing organisations, and stock exchanges are responsible for collecting stamp duty. The State government of each district must receive the stamp duty payments made for the issuance of shares in their respective bank accounts.

Under the Companies Act 2013 now mandates that even public organisations hold and shift their capital to dematerialized securities, according to the most recent report.

However, as private enterprises have not yet seen such implementations, the decision to use a dematerialized security account rests entirely with the business.

Issue of share certificate
 

The Companies (Issue of Share Certificates) Rules, 1960 governed the process of issuing share certificates till April 2014. The process of supplying shares and debentures has been reviewed in light of the upcoming enforcement of the Companies Rules with effect from April 1, 2014.

 

What is Stamp duty?
 

Stamp duty is a charge that should be paid on specific documents or instruments in order for them to be legally recognised.
 

Limitation on when share certificates can be issued
 

According to the Companies Act of 2013, the firm must issue share certificates within a specific amount of time following establishment and allocation.

  • Within two months, share certificates must be supplied if the event was shared with MOA subscribers at the time of incorporation.
  • If the event is a series of shares, such as a new allotment following incorporation, then a share certificate must be produced within one month of the date of the allotment.

Timeline to pay stamp duty without stay
 

According to the Indian Stamp Act, the time period is 30 days if the event is the date the share certificate was issued.

Within 30 days of the day, share certificates were issued, and every company registration is required to pay the stamp duty on the value of shares using an online payment method.

Discussing Jurisdiction
 

Wherever the company's registered office is, stamp duty must be paid. Tax is due upon stamping shares. For every Rs. 1000, or portion thereof, of the value of the shares, including the amount of the premium, stamp duty is paid on the share certificates.

Documents Required

If shares are distributed to shareholders at incorporation time:

  • Company COI, Memo Of Association, and Article Of Association Form PAS 3 with a signed share certificate and payment receipt were filed with the ROC (in case of additional allotment)
  • Subscribers' list
  • Board decision allocating shares to subscribers
  • Board resolution authorising the issuance of share certificates and the payment of stamp duties
  • The Directors' List
  • Certificate of Practicing Professional to Whom Power to Pay Stamp Duty Is Given

If shares are distributed after incorporation:
 

  • AOA Form PAS-3, Company COI, MOA, and signed share certificate were submitted to the ROC, together with a payment receipt (in case of further allotment)
  • list of recipients
  • Board decision allocating shares to allottees
  • Board decision authorising the issuance of share certificates and the payment of stamp duties
  • The Directors' List
  • Certificate of Practicing Professional to whom Stamp Duty Payment Authority is Granted.
  • Optional certificate of previously paid stamp duty

All necessary paperwork will be in pdf format and will have a certified signer's digital seal. The business must pay the stamp duty online via the SHCIL e-stamp website link. It is highly necessary to say that the share certificate's stamp duty is state-dependent.

Consequence Of Non-Payment Of Stamp Duty
 

The Company incorporation shall be subject to a severe penalty under the Act, which may amount to 10 times the duty, in the event Of the issuance of share certificates, of non-payment of stamp duty or avoidance of payment of stamp duty in the case of share allocation.

Process Duration

Therefore, if all necessary documents are provided at once to the portal, then-

  • A Challan must be produced after a week or two.
  • The sum of the stamp duty will be paid with cash, a debit card, nett banking, NEFT, or RTGS.
  • Print the invoice
  • After presenting a printed receipt, obtain an e-Stamp Certificate from the Delhi Stockholding branch that is closest to you.
  • Add a copy of the e-stamp certificate.
  • The certificate of stamp duty paid amount will be issued following examination and fixing of the e-Stamp certificate and after that
  • The status menu online allows users to download the final certificate.

Once all necessary documents are accepted by the portal, then-
 

  • After compliance, a reference number will be generated.
  • On the status side, you can view the status of the first request.
  • The hearing date will also be shown in the status section after one or two weeks, or it will be communicated through email. If it is not received within the given period, get in touch with the Delhi Stamp Collector.
  • The penalty may be assessed in an SDM hearing at a rate of up to ten times the stamp duty. The sanction is determined by the authorised professional's defence.
  • After the hearing, the challan must be produced within a week or two.

If the share certificate is duplicated or divided

Since stamp duty was already paid on the specific share certificates holding a unique number of shares, a sum of Rs. 10/- will need to be paid.

A result of failing to pay stamp duty

The Company incorporation shall be subject to a severe penalty under the Act, which may amount to 10 times the duty, in the event that stamp duty is not paid or is not paid in full on the issuance of a share certificate in the case of the allotment of shares within the time period of 30 days.

The Company must also appear at the hearing on the date that will be announced by the relevant department or body.

Conclusion
 

The stamp duty required by the State where the share certificate was issued must be present. Therefore, it depends entirely on the execution of the share certificate and the state in which the company's registered office is located as to whether stamp duty is actually required to be paid on a share certificate in that state. Last but not least, it is advised that everyone pay the stamp duty in the state where the company's registered office is located.

 


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