C&M E-Alert: Clarification on Stamp Duty Payable on Issuance of Shares in Delhi

BACKGROUND

Payment of proper stamp duty is a critical part of execution or creation of an instrument that records a transaction or creates any right, obligation, title or interest. Stamp duty in India is primarily governed by the Indian Stamp Act, 1899 (“Indian Stamp Act”), which serves as the central legislation on this subject.

Certain States in India have made specific amendments to the Indian Stamp Act that apply only within their jurisdiction. The amendments to the Indian Stamp Act that govern stamp duty payments in the National Capital Territory (“NCT”) of Delhi, are referred to as the “Delhi Stamp Act”. In contrast, some States in India do not follow the Indian Stamp Act and instead have their own stamp act governing matters related to stamp duty within that State (such as the State of Maharashtra).

It is pertinent to note that any agreement or instrument that is not duly stamped is inadmissible in evidence before any court or authority. Such an instrument cannot be acted upon, registered or authenticated for any legal purpose. Any authority encountering an unstamped or insufficiently stamped instrument is obligated to impound it and send such an instrument for adjudication to the collector of stamps and revenue. Upon such adjudication and in addition to the payment of the deficient stamp duty, the collector has the power to determine and demand penalties that could go up to ten times of the deficient stamp duty applicable in the NCT.

On 29 July 2025, the Revenue Department of the Government of National Capital Territory of Delhi (“Revenue Department”) issued Circular No. F10(166)/COS(HQ)/STAMP.BR/2025/93 (“Circular 1”) clarifying the stamp duty payable on the issuance of shares by companies incorporated/registered within the jurisdiction of the NCT of Delhi (“NCT Companies”).

Under Circular 1, all NCT Companies are required to pay stamp duty on certificates or other documents evidencing the title to any shares, scrip, or stocks issued by NCT Companies at the rate of 0.1% of the value of such instruments, in accordance with Article 19 of Schedule I-A of the Indian Stamp Act, 1899 (i.e. the Delhi Stamp Act).

This obligation applies to both physical share certificates and dematerialised shares. Circular 1 further requires NCT Companies to apply for adjudication of stamp duty before the Revenue Department and ensure payment within the prescribed time frame failing which penalties may apply.

Circular 1 clarified that the rate of 0.1% is prescribed by the Delhi Government, not the Central Government, as under the Constitution of India, the power to determine stamp duty rates on issuance of shares lies with the State Governments under Entry 63 of the State List (List II) of Schedule VII.

Accordingly, the Delhi Government asserted its authority to prescribe stamp duty rates on shares, scrips or stock issuances within its jurisdiction.       

LATEST UPDATE

After assessment, the Revenue Department found that there is discrepancy in the implementation of this regime by the National Securities Depository Limited (“NSDL”) and the Central Depository Services (India) Limited (“CDSL”) (collectively referred to as “Depositories”). It was observed that the stamp duty collected by the Depositories on the issuance of shares and scrip by NCT Companies was not aligned with the provisions of Circular 1.

Accordingly, the Revenue Department issued Circular No. F.10(166)/COS(HQ)/Stamp Br./2025/181 (“Circular 2”) on 29 September 2025, addressed to the Depositories giving directions on the stamp duty rates for such share issuances by NCT Companies.

Circular 2 directed that:

• NSDL and CDSL must cease collecting stamp duty from NCT Companies on the issuance of shares in dematerialised form under Schedule 1 of the Indian Stamp Act, which levies a 0.005% duty (the Central rate); and

• instead, such NCT Companies must directly pay stamp duty at 0.1% under Article 19 of Schedule I-A of the Delhi Stamp Act to the Delhi Government using the Stock Holding Corporation of India Limited’s (“SHCIL”) e-stamping portal, where a mechanism to pay stamp duty exists since 2016.

In effect, Circular 2 reaffirms that the collection of stamp duty on share issuances in the State of Delhi is a matter reserved for the State and not the Depositories.

WHY IS THIS IMPORTANT?

Circular 1 and Circular 2 (collectively referred to as the “Circulars”) clarify the position for NCT Companies thereby departing from the Central stamp-duty framework:

Aspect	Before Circular 1	After Circulars 1 & 2
Rate of stamp duty	0.005% (as per Central Government’s Schedule I)	0.1% (as per Article 19 of Schedule I-A of the Delhi Stamp Act)
	Depositories on behalf of the Central Government	Delhi Government directly (through SHCIL)
Applicable law	The Indian Stamp Act (Section 9A) applicable for issuance and transfer of securities that occur through a stock exchange or a depository.	The Delhi Stamp Act
Form of issuance	Dematerialised form	Applies to both physical and dematerialised forms

The Circulars, thus, shift both the liability and the collection authority for stamp duty on share issuance from the Central to the Delhi Government.

The Revenue Department’s Circulars together mark a significant shift in the administration of stamp duty on share issuances for NCT Companies:

• Circular 1 established that such NCT Companies must pay 0.1% stamp duty under the Delhi Stamp Act, regardless of whether the shares are issued in physical or dematerialised form.

• Circular 2 implemented the framework by instructing Depositories to stop collecting and by enabling the NCT Companies to pay directly to the Delhi Government via SHCIL.

In the interim, the NCT Companies should take the following action:

• review past share issuances where only 0.005% duty was paid via Depositories;

• apply for adjudication with the Revenue Department for rectifying the inadequate payment of stamp duty (which may entail payment of penalties, as applicable); and

• ensure all future issuances of such shares comply with the Delhi Stamp Act.

*****

For specific guidance on how these changes affect your business, please contact our team: