Share Certificate Stamp Duty: Rates, Payment and Franking
Share certificate stamp duty is a tax the company pays when it issues shares. Since 1 July 2020 the rate is a uniform 0.005% of the issue value, which is ₹500 per crore. We work out the amount, arrange the stamping and prepare certificates in Form SH-1 within the two-month limit.
What it is
Share certificate stamp duty is the duty payable under the Indian Stamp Act, 1899 on the issue of shares. Franking is the process of paying it and getting the instrument stamped. The company, as issuer, pays it on the price or consideration mentioned in the share certificate.
The rate is fixed by Article 56A of Schedule I and applies across all states. The change came from the 2019 stamp duty reforms and took effect on 1 July 2020. States cannot charge their own rates on securities. Physical issues are still paid to the State Government where the registered office sits. A separate, higher rate of 0.015% applies when shares are transferred, which we cover in our share transfer work.
Who it applies to
Newly incorporated companies
The subscribers to the MOA get certificates within two months of incorporation. Those certificates carry stamp duty on their value.
Companies allotting more shares
Every fresh allotment after a rights issue, preferential allotment or private placement needs certificates, and each one is stamped. Our share allotment PAS-3 page covers the filing side.
Companies issuing duplicate certificates
Say a founder loses the original certificate after a funding round. The company issues a duplicate. The company records it in the register of renewed and duplicate certificates, Form SH-2. If the duplicate has a fresh value on its face, check with us whether duty applies.
Why it matters
Unstamped certificates are weak evidence
A certificate that is not duly stamped may not be accepted as evidence in court or by a registering authority until the duty and penalty are paid.
Lenders and investors look for it
Due diligence teams ask for stamped certificates and the share register. A gap slows a funding round or a bank loan.
Penalty rises with delay
Here is the catch: late stamping can draw a penalty of up to ten times the duty. On a large allotment that adds up quickly.
Documents required
For the allotment
- Board resolution allotting the shares
- Shareholders’ resolution, if required
- Application forms and proof of payment
For the certificate
- Register of members entries
- Share certificate in Form SH-1, serially numbered
- Signatures of two directors, or a director and the company secretary
For the stamp duty
- Issue price per share, face value plus premium
- Total issue value for the allotment
- Payment challan or franking receipt from the state channel
How stamp duty is calculated
The duty is 0.005% of the issue value. Issue value means face value plus any share premium. Take a Faridabad manufacturing company that allots 1,00,000 shares of ₹10 face value at ₹100 each. The issue value is ₹1 crore, so the duty is ₹500. Not a big number, and easy to forget.
| Event | Rate | Basis |
|---|---|---|
| Issue of shares (original allotment) | 0.005% | Issue price or consideration in the certificate |
| Transfer of shares for consideration | 0.015% | Consideration in SH-4 or the delivery instruction |
| Transfer by genuine gift, no consideration | Nil | Transfer duty only; issue duty is separate |
For demat shares, the depository collects the duty. For physical certificates, the company pays into the State Government account of the state where its registered office is.
How it works
Fix the issue value
We total face value and premium for the allotment and compute 0.005% on the figure.
Draft the certificates
We prepare the Form SH-1 certificates with serial numbers, folio numbers and the names of holders, ready for director signatures.
Pay the duty and stamp
We arrange payment through the channel your state prescribes and get the certificates stamped before they are delivered.
Issue and record
We update the register of members, record the date of issue and keep a copy of the stamped certificates in the company file.
Timelines
Allotment to certificate
Under Section 56(4)(a) and (b), certificates go to subscribers within two months of incorporation and to allottees within two months of allotment.
Allotment return
PAS-3 within 30 days of allotment, or 15 days for a private placement. This is a separate ROC filing.
Transfers
Certificates on transfer go out within one month of receiving the instrument of transfer, under Section 56(4)(c).
What happens if you miss it
Late stamping
The stamp authority can levy a penalty of up to ten times the duty on an instrument that is stamped late.
Late certificates
Section 56(6): ₹50,000 on the company and on every officer in default.
Late PAS-3
Section 39(5): ₹1,000 per day or ₹1 lakh, whichever is less, plus the additional ROC fee.
Frequently asked questions
What is the stamp duty on share certificates in India?
The duty on issuing shares is 0.005% of the issue value, or ₹500 per crore, in every state from 1 July 2020. It falls under Article 56A of the Indian Stamp Act. A transfer for consideration costs 0.015% instead. The rate is uniform, so only the payment channel differs by state.
Who pays stamp duty on a share certificate?
The company pays the duty when it issues shares, not the shareholder. The shareholder pays the higher 0.015% duty only when buying shares from another holder. Allotting to investors? Build the issue duty into your closing costs. We calculate the figure and arrange payment so delivery is never held up.
Is stamp duty payable on issue of shares in demat form?
Yes, but the depository collects it. When shares are credited to a demat account, the duty is calculated on the price in the allotment list and paid through the depository to the State Government. Physical certificates are stamped through the state channel. The rate, 0.005%, is the same either way.
What is the penalty for not stamping share certificates?
The stamp authority can charge a penalty up to ten times the duty if an instrument is stamped late. The certificate may also be refused as evidence until stamped. Separately, Section 56(6) fines the company ₹50,000 if certificates are not issued within two months. Stamp early and the exposure stays small.
Do I pay stamp duty on a rights issue or preferential allotment?
Yes. Any fresh issue of shares is an issue of securities, so the 0.005% rate applies to the issue value, including premium. That covers rights issues, preferential allotments and private placements. A bonus issue or a special structure may need a closer look, so tell us the terms before allotment and we will confirm the base for the duty.
Is stamp duty needed on a duplicate share certificate?
Check before you assume. A duplicate replaces a lost or damaged certificate and is recorded in Form SH-2. Whether fresh duty applies depends on whether the duplicate carries a value that attracts it. We review the facts and tell you whether any amount is due. Keep the board resolution, indemnity and police or press notice on file.
How is stamp duty paid on physical share certificates?
You pay it into the State Government account of the state where your registered office is. The payment channel varies by state. We find the one your state prescribes, pay the amount and get the stamped certificate back. You do not need to visit an office.
Do I have to file the stamped certificates with the ROC?
No. Share certificates are not filed on the MCA V3 portal. The company keeps them, delivers them to holders and updates its registers. What you do file is Form PAS-3, within 30 days of the allotment. We prepare both so the stamped certificates and the ROC record agree.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Government cost: stamp duty at 0.005% of the issue value for an original issue. Transfers for consideration carry 0.015%, and a genuine gift with no consideration carries nil transfer duty.
Ready to begin?
Send us the allotment details. We will compute the duty, draft the SH-1 certificates and get them stamped.