As per the Indian Law, stamp duty is payable on every instrument. It is an indirect tax paid to the government. The Indian Stamp Act, 1899 (2 of 1899) was enacted to consolidate and amend the law relating to stamps. It extends to the whole of India.
The Indian Stamp Act, 1899 (2 of 1899) is a fiscal statute prescribing the rates of Stamp Duty as specified in Entry 91 of List-I (Union list) of the Seventh Schedule to the Constitution of India List (viz. Bills of Exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts) The States are empowered under Entry 63 of List-II (State list) of the Seventh Schedule to the Constitution of India to prescribe the rate of stamp duty on instruments other than the instruments specified in Entry 91 of Union list.
The Indian Stamp Act, 1899 is a Central enactment and the state have the powers to adopt the Indian Stamp Act, 1899 with amendment to same, to suit the transaction peculiar to each state. Accordingly certain states have introduced Schedule 1 to the Indian Stamp Act, 1899 being the stamp duty payable in each state. State such as Maharashtra (The Bombay Stamp Act, 1958), Gujarat (The Gujarat Stamp Act, 1958), Karnataka (The Karnataka Stamp Act, 1957), Kerela (The Kerela Stamp Act, 1959) and Rajasthan (The Rajasthan Stamp Act, 1998) have their separate Stamp Act, while many State follows the Indian Stamp Act, 1899.
There are mainly two types of stamp paper.
- Judicial stamp papers: As the name suggest, it is used for Court proceedings. It is called Court fees.
- Non-Judicial stamp papers: This is used for contractual kind of activities between the parties e.g., contracts, agreements, registration of documents, entering leases /sale purchase transactions etc.
Stamp duty serves as a legal requirement for certain types of transactions to be considered valid and enforceable. For example, a sale agreement for a property must be executed on a stamp paper of appropriate value and stamped according to the relevant state’s stamp duty laws. Failure to pay the appropriate stamp duty on a transaction can result in penalties or fines and may render the document invalid in a court of law.
Stamp Duty payable on instruments specified by the statute is fixed or on ad valorem basis i.e., on basis of value of property. The stamp duty charges are mainly based upon the values which are mentioned in the documents. e.g., Articles of Association, Mortgage deed etc. However, for few documents e.g., Affidavits, Power of Authorization, indemnity bond, the stamp duty payable is always fixed regardless of the value which is mentioned in the document or the instrument. For certain other instrument, stamp duty is based on the consideration value mentioned in the document or the market value, whichever is higher. e.g. Conveyance, Sale Agreement, Partnership Deed etc
The payment of Stamp Duty is mostly done before the execution of the document. Failing to make the necessary payment will result in penalty charges. Documents which are inadequately stamped are not admitted as evidence in the court. The stamp papers are to be purchased in the name of one of the parties to the transaction. The validity of a stamp paper is six months from the date of purchase.
Patents, trademarks, and other forms of intellectual property are included within the meaning of movable property under the stamp laws. As such, state specific stamp laws are applicable for the IP rights. Stamp Duty pertaining to IP rights is levied at various stages of registration, licensing and transferring.
In general, stamp duty is applicable on various types of instruments, including;
- POWER OF ATTORNEY (POA): – If an application for trademark/patent/design or any other Intellectual property rights, is filed in India by a person other than the Applicant, it is mandatory to submit a duly stamped Power of Attorney. The POA can be signed by the Authorized Signatory of the Applicant. The Stamp duty payable being state specific may approximately be up to 10 USD. There is no requirement for notarization and/or legalization.
- AFFIDAVITS: In various proceedings, be it at Court or Registry level it is required to file an Affidavit. Basically, an affidavit is a sworn statement put in writing. With respect to trademark, if the Applicant claims prior use of the mark, in such case it is a mandatory requirement to submit the Affidavit of use. The Applicant shall file an affidavit testifying to such use along with supporting documents.. The Stamp duty payable being state specific, may be up to 5 USD for Affidavit. The Affidavit of use must be duly notarized.
- ASSIGNMENT AGREEMENT: Assignment refers to actual transfers of ownership of intellectual property from the assignor to the assignee. In this, the rights of the assignor is permanently transferred. It is an absolute transfer. Such transfer of Intellectual Property rights is carried out by way of an assignment deed. It is pertinent to note that payment of stamp duty is not required for the assignment of Copyrights. Stamp duty is payable on the monetary consideration stated in the assignment deed. Stamp duty payable varies in each State. The Assignor and Assignee can check for the stamp duty rates in its particular state and thereby execute a assignment deed in which the lower stamp duty is applicable. The applicable stamp duty rates in India varies from 3% to 7% of the consideration amount, depending on the state wherein it is executed.
- LICENSING AGREEMENT (REGISTERED USER AGREEMENT): – In a Licensing agreement, the IP holder (“licensor”) licenses its IP rights to any third party and allows a third-party to use the said rights for a limited time period. A licensing agreement is subject to stamp duty. Stamp duty is paid by the licensee to the licensor.
- BUSINESS AGREEMENTS (e.g., Non-disclosure Agreement, Endorsement Agreement, memorandum of Understanding, Master Service Agreements, Franchise Agreement etc.) Stamp Papers are not mandatory for all the agreements but are necessary only for a few kinds of or instruments or agreements as specified by the State government. Generally, no stamp duty is payable on MOUs or NDA’s. However, as a general practice, people are putting it on stamp paper to make it enforceable in the Court of Law. A document which is stamped acts as valid evidence in a court of law.
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 “Instrument” includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or record;”
 Rule 25 of Trade Marks Rule, 2017- Statement of user in applications— (1) An application to register a trademark shall, unless the trademark is proposed to be used, contain a statement of the period during which, and the person by whom it has been used in respect of all the goods or services mentioned in the application.
In case, the use of the trademark is claimed prior to the date of application, the applicant shall file an affidavit testifying to such use along with supporting documents.