India: Decoding The Amendments To The Indian Stamp Act, 1899, For Debentures – Part II

Last Updated: 25 April 2019
Article by Avinash Umapathy and Hamsaanandini Nanduri

The key amendments that the Finance Act, 2019 proposes to the Indian Stamp Act, 1899 have been examined in Decoding the Amendment to the Indian Stamp Act, 1899 for Debentures – Part I. The impact of the amendments on debentures have also been analysed against the prevailing stamping arrangement for debentures.

This second part deals with the interplay between the definitions of 'debentures' and 'securities' under the Amendment, and issues relating to the implementation of the Centralised Collection Mechanism (CCM).

Do all Debentures Qualify as 'Securities' for the Purposes of the Amendment?

This question is relevant for the following reasons:

  • The CCM is available to 'securities' dealt with on a stock exchange or depository.
  • Once stamp duty on eligible securities is collected by a stock exchange or a depository, stamp duty on all secondary instruments relating to such securities is exempt.

Under the Amendment, the definition of 'securities' directs us to the definition under the Securities Contract (Regulation) Act, 1956 (SCRA), which in turn defines securities to 'include' shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature.

It is unclear whether debentures issued by companies to which the SCRA would not apply, should come within the definition of securities for the purposes of the CCM (say debentures issued by private companies). The objective of the Amendment refers to 'securities market instruments', which is generally understood to be in the context of public markets.1

It is interesting that the Amendment seeks to include a definition for the term 'securities' in addition to the term 'marketable security'. So, one can contend that 'securities' ought to be wider than 'marketable security' to read them harmoniously. Therefore, the term 'securities' should include instruments that are 'marketable securities' as also other instruments.

As things stand, there is no indication on whether the inclusive definition used in the Amendment is to be read wider than the definition in SCRA, which is also an inclusive definition!

How Will the CCM Work for Debentures?

Sl. No. Transaction What is liable to stamp duty? Who will pay? Who will collect? What is stamp duty calculated on?
1. Sale of securities through a stock exchange Sale (as in the clearance list2) Buyer Stock Exchange or Clearing Corporation Market value of such securities at the time of settlement
2. Transfer of securities for consideration, made by a depository (not being covered under Sl. No. 1) Transfer Transferor Depository Consideration amount
3. Creation or change in the records of a depository pursuant to an issue of securities Allotment List Issuer Depository Total market value of securities contained in the allotment list

As is evident from the table, as regards sale and transfer of securities, the Amendment seeks to collect stamp duty on the transaction of sale or transfer itself rather than the instruments involved in the transaction. The corresponding entries in the Schedule to the Act are also amended so as to levy stamp duty on the transaction itself3. On the other hand, as regards an issuance of securities, while the entries in the schedule levy stamp duty on the issuance itself, the CCM seems to be limited to collecting stamp duty payable on the allotment list.

If we analyse the table in the context of debentures, the following observations are relevant:

  • Debentures are liable to stamp duty under Article 27. If these debentures are eligible securities, then would stamp duty payable on issue of debentures be collected through the CCM?
  • Not every issue of debentures needs to have a letter of allotment. If there is a letter of allotment issued for debentures (and these debentures are eligible securities) and appropriate stamp duty is paid on the letter of allotment, then in light of the new Section 4(3), which exempts stamp duty on secondary instruments, would such debentures be exempt from stamp duty?
  • The Amendment does not provide a definition or any other indication of what the term 'allotment list' seeks to cover. It is unclear whether stamp duty payable on 'allotment list' should be read to include the stamp duty payable on the debentures per se. Unless this is so, the objective of the Amendment to bring about ease and stability may not be achieved.

Stamp Duty – Who Decides?

Matters relating to stamp duty appear in all three lists (the Union list, the State list and the Concurrent list) under Schedule 7 of the Constitution of India.

The Union List contains rates of stamp duty applicable to debentures.

The State List contains rates of stamp duty for all instruments (other than those listed in the Union list).

Stamp duty (other than rates of stamp duty) features in the concurrent list, thereby giving the Centre and the State legislatures simultaneous power to legislate on the subject.

While the ability of the Centre to legislate on the matters on which it has is subject to interpretation of the entries in the lists, it can be strongly argued that the Amendment seeks to cover aspects that fall within the exclusive scope of the State legislatures (say rates of stamp duty applicable on issue of shares and transfer of debentures). This is further evident from the fact that the rules for the implementation of the CCM are to be made by the Central Government in consultation with the State Government4. The Centre also proposes to set up a coordination council comprising representatives from the Centre and the States to make recommendations for the review and revision of stamp duty rates5.

Stamp duty is a significant contributor of revenue to the State Governments. While some in the market may consider the Amendment as a welcome change for investors and issuers, in the way it brings stability and ease in dealing with securities, it must be noted that the Amendment takes away the autonomy of the State Governments on certain aspects. Needless to say, consent and cooperation from State Governments is going to be crucial for this Amendment to be implemented effectively and to achieve its intended objectives.


1 Press release dated February 21, 2019 on the Amendments to the Indian Stamp Act, 1899 for Rationalization of Stamp Duty & Design of Zero Evasion Collection Mechanism in Respect of Securities Market Instruments.

2 The Amendment defines a clearance list to mean a list of transactions of sale and purchase relating to contracts traded on the stock exchanges submitted to a clearing corporation in accordance with applicable law.

3 Under the revised Article 27 (applicable to Debentures), stamp duty is payable on issue, transfer and re-issue. Under the proposed Article 56A (applicable to Security other than Debentures), stamp duty is payable on issue and transfer of securities.

4 See proposed Section 9A (4) of the Act.

5 Press release dated February 21, 2019 on the Amendments to the Indian Stamp Act, 1899 for Rationalization of Stamp Duty & Design of Zero Evasion Collection Mechanism in Respect of Securities Market Instruments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions