Update on Stamp Duty on Issuance of Shares in Delhi

In the current regulatory landscape, the element of stamp duty continues to play an important role in the process of verifying the legal documents, especially those related to corporate transactions such as the issuance of shares. However, the shift towards the digital platforms and dematerialized securities, the legal obligation to pay stamp duty remains firmly in place.

On 29th July 2025, the Collector of Stamps, National Capital Territory (NCT) of Delhi, issued a circular clarifying the applicable rate of stamp duty on the issuance of shares. This update represents as an important and valuable reminder for all companies with their registered office situated in Delhi to ensure timely compliance with Article 19 of Schedule I-A of the Indian Stamp Act, 1899, as amended and applicable to Delhi.

This article provides a detailed overview of the legal framework, recent developments, and practical implications for companies operating in Delhi.

Understanding Stamp Duty on Share Issuance

Stamp duty is a type of tax levied on legal instruments or documents to give them legal validity and evidentiary value. In the corporate context, it is usually applicable to documents such as share certificates, share transfer deeds and other relevant instruments involving the issue or transfer of securities.

When a company issues shares, whether in the form of physical certificates or through dematerialized (DEMAT) mode, the document that evidences the right or title to such shares is subject to stamp duty under the Indian Stamp Act.

Applicable Legal Framework

1. Constitutional Distribution of Powers

The power to levy stamp duty in India is divided between the Union and the State Governments, as specified in the Seventh Schedule to the Constitution of India: -

• Entry 91 of the Union List (List I) empowers the Central Government to prescribe stamp duty rates on certain instruments, including transfer of shares, debentures, promissory notes, and insurance policies.
• Entry 63 of the State List (List II) authorizes State Governments to fix stamp duty rates for documents not covered under List I, such as instruments evidencing the issue of shares or the title to shares.

As a result, while the transfer of shares is regulated by central legislation and the associated stamp duty is often collected by depositories (such as NSDL or CDSL) at a central rate (typically 0.005%), the issuance of shares is governed by State-specific provisions.

2. Indian Stamp Act, 1899 – Schedule I-A

For the NCT of Delhi, the relevant provision is Article 19 of Schedule I-A, which lay downs a stamp duty rate of 0.1% on any certificate or document evidencing the right or title to shares, scrip, or stock of any incorporated company.

Importantly, the provisions of Schedule I (applicable to central legislation) are not applicable in this context. Companies based in Delhi must refer to Schedule I-A, which is specific to the territory and incorporates amendments which is passed by the Delhi Government.

Highlights of the Circular Dated 29/07/2025

The circular issued by the Collector of Stamps, Delhi, provides the following key directions: -

1. Stamp Duty Rate: Companies having their registered office in the NCT of Delhi must pay stamp duty at 0.1% of the value of shares issued.
2. Form of Issuance: This requirement applies irrespective of whether the shares are issued in physical or digital (DEMAT) form.
3. Legal Basis: The duty is payable under Article 19 of Schedule I-A of the Indian Stamp Act, 1899, read with Section 3 of the Act.
4. Jurisdictional Clarification: The circular reiterates that the Delhi Government has the authority to impose the stamp duty on such documents, pursuant to the constitutional framework discussed above.
5. Adjudication Requirement: All listed and unlisted companies located in Delhi must apply for adjudication of stamp duty before issuance, along with supporting documents as prescribed under the Act.
6. Compliance Deadline: Adjudication must be completed within the stipulated timeline and failure to do so may attract the legal penalties under the Indian Stamp Act.

Practical Implications for Companies

The implications of this circular are significant, especially for companies that have been operating under the assumption that the central stamp duty collected through depositories is sufficient. While central collection mechanisms are valid for share transfers, they do not apply to the issuance of shares, which is subject to state-level regulation.

This clarification removes ambiguity, especially where depositories have collected stamp duty at 0.005% (the central rate). However, state-prescribed rates prevail, and 0.1% is the applicable rate in NCT of Delhi—making adjudication and payment a statutory obligation.

Key Takeaways for Delhi-Registered Companies

• Issuance vs. Transfer: Understand the distinction. The issuance of shares is a fresh creation of rights, while transfer refers to the movement of existing rights. The former falls under state jurisdiction in Delhi.
• Mandatory Adjudication: All share issuances, whether to founders, investors, or employees under ESOPs, require prior adjudication of stamp duty at 0.1% in Delhi.
• Digital Issuance Not Exempt: Issuance through DEMAT accounts or depositories does not exempt a company from this obligation. The law treats both physical and electronic documents equally.
• Retrospective Risk: Companies that have already issued shares without paying proper stamp duty may be exposed to retrospective penalties and should consider voluntary adjudication to regularize their position.

Documents Required for Adjudication

To comply with the adjudication process, companies are typically required to submit the following: -

• Certified copy of the Board resolution authorizing share issuance.
• Copy of Form PAS-3. (Return of Allotment)
• Valuation report or consideration details.
• Copy of Memorandum and Articles of Association.
• PAN and CIN of the company.
• Proof of registered office address in Delhi.

Any other additional documentation may be required depending on the nature and volume of the allotment.

Enforcement and Penalty Provisions

Non-compliance with stamp duty requirements can lead to penalties under Section 62 of the Indian Stamp Act, 1899. Instruments not duly stamped may be declared inadmissible in court, and penalties up to 10 times the deficient duty may be levied.

The circular reinforces the Delhi Government’s commitment to enforcement and signals stricter scrutiny of compliance going forward.

Conclusion

The recent circular issued by the Collector of Stamps, NCT of Delhi offers much required clarity on the obligation to pay stamp duty on issuance of shares under Article 19 of Schedule I-A of the Indian Stamp Act, 1899. By explicitly stating that the duty applies to both physical and digital forms of issuance, the circular resolves a long-standing area of confusion for companies, advisors, and stakeholders. If you need professional assistance, feel free to contact CRSPL Business Consultants.

All companies with their registered office in Delhi—whether public or private, listed or unlisted—must ensure timely adjudication and payment of stamp duty at 0.1% of the value of shares issued. Taking proactive steps to comply with this statutory requirement is essential to avoid penalties, ensure legal validity of share issuances, and uphold good governance practices.