The Indian Stamp Act. 1899 is the law relating to the stamps which consolidates and amends the law relating to stamp duty. It is a fiscal legislation envisaging levy of stamp duty on certain instrument. The Act is divided in to eight chapters and there is a schedule which contains the rate of stamp duties on various instrument.
a) Union List: Union List Entry 91 gives power to the Union Legislature to levy stamp duty with regard to certain instrument mostly of commercial character.
b) State List: State List, Entry 63 confers on the state power to prescribe the rate of stamp duties to other instrument. As per principles for levy of duty fall in the concurrent list.
c) Amendment entry 44
The amendments to the central Act effected by the states are in the shape of amendment of section of the Central Act, adding new section, adding separate schedules, modifying in schedules etc.
Meaning/Definition of Instrument
Section 2(14) defines and instrument to include every piece of document by which any right or liability or purports to be created, transferred, limited, extended extinguished or recorded. The definition is an inclusive definition, and is not necessarily restricted to those specifically mentioned in the definition. Just take some example:
i) An unsigned draft is not an Instrument.
ii) Any entry in register, containing terms of hiring is an instrument subject to authentication by thumb impression of the hirer.
An Instrument which is chargeable with stamp duty only on being executed is not liable to stamp duty until it is signed.
According to Section 2(6) Chargeable as applied to an instrument executed or first executed after the commencement of the Act means chargeable under the Act and as applied to any other instrument, chargeable under the law in force in India when such instrument executed or where several persons executed the instrument at different times.
Charging Section of Stamp Duty
Section 3 of the Act is the charging section. It provides that subject to the provision of the Act. and the exemption contained in schedule 1, the following instrument shall be chargeable with a duty of the amount indicated in that schedule as the proper duty thereof, namely.
a) Every instrument mentioned in the schedule which, not having been previously executed by any person, is executed in India on or after the first day of July’1899.
b) Every bill of exchange payable otherwise than on demand or promissory note drawn or made out of India on or after the date and accepted or paid or presented for acceptance.
c) Every instrument mentioned in that schedule, which not having been previously executed by any person.
Extent of liability of Instrument to Duty
Section 4 provides that, where in the case of any sale, mortgage or settlement several instruments are employed for completing the transaction:-
a) Only the Principal instrument shall be charged with the duty prescribed for conveyance, mortgage or settlement.
b) Each of the other instruments shall be chargeable with a duty of one rupee.
The Above section 4 is not applied in the following circumstances:
i) A lease is executed and got registered. A second document is executed altering the terms of the first document. The second document has to be stamped as a lease. Section 4 does not apply.
ii) A purchaser of land executes a mortgage of the land in favour of the vendor for a portion of the purchase money. The mortgage is liable to full duty as a separate instrument. Section 4 does not apply.
From the above we can have small picture of the applicability of stamp act.