Home » Mergers & Acquisitions » 5 States with most Favourable Stamp Duties in India for a M&A Transaction

5 States with most Favourable Stamp Duties in India for a M&A Transaction

Stamp duties in India are fees for registration of documents and authenticating, it gives a government sanctity on the documents and the law makes it necessary in case of transfer of property or of transfer of some form of right holding by a person, the government charges fees/duty in registering the document. The transfer of rights becomes an authentic right for the transferor and the transferee in the transaction.

The stamp duty, on the other hand, is the charge that is levied on the registering document. The law is governed by the Indian Stamp Act, 1901 and the levying of stamp duty is decided by the state government, since document registration is a state subject under the 7th Schedule List II- State List Entry 63 of the Constitution. Some states have enacted a sperate law for determining the stamp duty which has been discussed here in the article. The different States and Union Territories have different stamps on registration of documents.

How to evaluate the favourability of the Stamp duty?

In this article, I will provide information on stamp duty levied by 5 important states namely:

  1. Maharashtra
  2. NCT of New Delhi
  3. West Bengal
  4. Karnataka
  5. Madhya Pradesh

The comparative stamp duty rates will be upon the following subjects from the above-mentioned states:

  • Agreement or Memorandum of Agreement
  • Articles of Association of a Company
  • Bond
  • Conveyance Deed
  • Memorandum of Association of a Company.
  • Partnership
  • Share Warrants

Also Read: Understanding the Difference Between Asset Sale and Slump Sale

 

Stamp duty in the State of Maharashtra

In the State of Maharashtra, the Schedule 1 prescribes the latest rates of stamp duty applicable which are:

A.              Agreement or Memorandum of Agreement

If it is related to the sale of bill of exchange then duty will be of one rupee for every 10,000 rupees or in party thereof. If it is relating to the purchase of sale of Government security it will be fifty paise for every rupee for 1,00,000 (one lac) or part thereof the value of such security at the time of its purchase or its sale.

If it is relating to the purchase or sale of shares, scrips, stocks, bonds or other marketable security of alike of any incorporated company or other local body corporate wherein, such agreement or memorandum of an agreement is with or through a member or between members of Stock Exchange under Securities Contracts (Regulation) Act, 1956, it will be one rupee for every Rs.10,000 or part thereof of the value of the security at the time of its purchase or sale.

B.              Articles of Association of a Company 

Where a company having no share capital or nominal share capital or increase share capital it will have a stamp duty of 0.2 per cent on share or increased share capital, as the case may be subject to a maximum of Rs. 50,00,000. The said rule gives an exemption to those Articles of Association which are not formed for-profit and registered under Section 25 of the Companies Act, 1956

C.              Bond

A Bond not being a debenture and not being bonds which are otherwise described under the Maharashtra Stamp Act, 1959 for a particular type of Bonds, the stamp duty will be of one percent of the amount of the Bond subject to a minimum of rupees five hundred (Rs.500).

D.              Conveyance Deed

The Stamp duty will be charged on the basis of the true market value of the property, which will be the subject matter of Conveyance:

  1. If relating to a movable property the duty will be 3 percent of the market value of the property.
  2. If relating to the immovable property of area situated in the limits of Municipal Corporation or any Cantonment area or any urban area and from the limits of any Municipal Council or Cantonment Area or from the limits of the Mumbai Metropolitan Region Development Authority or its influencing area it will be 5 percent of the market value of the property.
  3. Also if the immovable property is within the limits of any Grampanchayat area or any such area then duty will be 4 percent of the market value of the property.
  4. If the property is both movable and immovable then the duty as provided in the above point 1 and 2.
  5. In case of amalgamation or reconstruction of companies under Section 394 of the Companies Act, 1956 or under the order of RBI under S.44A of the Banking Regulation Act, 1949 then duty of 10 per cent of the aggregate of the market value of the shares issued or allotted in exchange or otherwise and the amount of consideration paid for such amalgamation  

E.              Memorandum of Association of a Company.

if the document is accompanied with the articles of association as under Section 26 of the Companies Act, then the duty will be one thousand rupees. If no document is associated with it then the stamp duty will be 0.2 percent according to the share capital of the company subject to a minimum of rupees one thousand and a maximum of rupees 50,00,000.

F.               Partnership (Entry 46)

The form of an instrument of the partnership includes Limited Liability Partnership and Joint Venture to run a business, earn profits and to share profits, wherein there is no share of contribution in a partnership or where such share contribution is brought in by way o cash which does not exceed 50,000 then stamp duty of five hundred rupees.

Also where such share contribution exceeds by way of cash exceed Rs.50,00 then stamp duty will be one per cent of the amount share contribution subject to a maximum of rupees fifteen thousand.

G.              Share Warrants

In issuance of any share warrants under Indian Companies Act, 1882 then stamp duty will be one and half times of the duty payable on a Conveyance for a consideration equal to the nominal amount of the shares specified in the warrant.


Also Read: What is a Swap Ratio in an M&A Transaction?

Stamp Duty in the NCT of Delhi[1]

The National Capital of Delhi is a Union Territory having its own legislature and the law applicable is the Indian Stamps Act, 1899, and the stamp duty rates are prescribed in Schedule 1 and Schedule 1A of the Act, which are:

A.              Agreement or Memorandum of Agreement

If it is related to the sale of bill of exchange then the duty will be of two annas. If it is relating to the purchase of sale of Government security, then stamp duty will be one anna for every Rs.10,000/- of value or part thereof subject to the maximum of ten rupees.

B.              Articles of Association of a Company

For registering the Articles of Association of the Company, the stamp duty will be 25 rupees, with an exemption for such companies which are registered with the intent of not making a profit.

C.              Bond

Where the amount of bond does not exceed Rs. 10 then stamp duty will be two annas and of Rs.50 will be of four annas. In Rule 15 of the said Schedule, the rates increase after every Rs.100, which the stamp duty may increase by one rupee or by eight annas which adds up. To the last stamp duty which has been enumerated under the schedule is when the bond is of the value of Rs.900 to Rs.1000 where such amount will have a stamp duty of Rs.5 and after every increase of Rs.500 in the bond value will increase stamp duty by two rupees and eight annas.

D.              Conveyance Deed

The stamp duty will be levied as per the value of the conveyance deed:

  1. The stamp duty rate starts on the value of Rs. 50 to Rs. 100 whereby, the stamp duty levied will be of Re 1 only.
  2. At every increase in hundredth value in the valuation of the property conveyed will add one rupee to the stamp duty levied for example Instrument of value between Rupees 100 to 200 will have stamp duty of Rs.2 and where the instrument of value between Rupees 200 to 300 will have stamp duty of Rs.3 and so on.
  3. Where the value of the instrument is more than Rs.1000 then on every increase in the value of the instrument by Rs.500 will add an excess levy of Rs. 5 as stamp duty.

E.              Memorandum of Association of a Company.

If the document is accompanied by the articles of association as under Section 26 of the Companies Act, then the duty will be fifteen rupees. If no document is associated with it then the stamp duty will be Forty Rupees.

F.               Partnership (Entry 46)

An instrument of partnership, where the capital of the partnership does not exceed Rs.500 then the stamp duty will be of two rupees and eight annas and in any other case the stamp duty will be ten rupees.  

G.              Share Warrants

In the issuance of any share warrants under Indian Companies Act, 1882 then stamp duty will be one and half times of the duty payable on a Conveyance for a consideration equal to the nominal amount of the shares specified in the warrant.

Stamp Duty in the State of West Bengal[2]

The Indian Stamp Act, 1899 is applicable to the State of West Bengal and the prescribed stamp duties as provided under the Schedule 1A of the Act which are:

A.              Agreement or Memorandum of Agreement

If the agreement is related to the sale of an immovable property then the stamp duty charges will be according to the prescribed duty as applicable on Conveyance deed.

Also, where the sale of immovable property is to transfer or give authority to a developer or a promoter for construction on the immovable property then-

Where market value is of:

Market Value Stamp Duty
Less than 30 lakhs Five thousand Rupees
30 lakhs but not exceeding 60 lakhs rupees Seven thousand Rupees
60 lakhs but not exceeding one crore rupees Ten thousand Rupees
One crore but not exceeding one and half crore rupees Twenty thousand Rupees
One and a half crore but not exceeding three crore rupees Forty thousand Rupees
Exceeding three crores Seventy thousand Rupees

B.              Articles of Association of a Company

The stamp duty will be the same as provided under the head of State of NCT Delhi.

C.    Bond

The stamp duty will be 4% of the value secured.

D.    Conveyance Deed

Conveyance, in respect of amalgamation, merger, reconstruction, or demerger, of companies, other than amalgamation, merger, reconstruction or demerger, of two banking companies or a banking company with a non-banking financial company, executed on the basis of decree or final order of any Civil Court or every order made by the Tribunal under section 394 of the Companies Act, 1956

E.    Memorandum of Association of a Company.

Same as provided under the head for the stamp duties of the State of NCT Delhi.

F.     Partnership:

Where the value of an investment is:

Upto Rs. 500 Rs. 20
Up to Rs. 10000 Rs 50
Up to Rs. 50000 Rs 100
Exceeding Rs 5000 Rs 150

G.    Share Warrants

Same as provided under the head of State of NCT Delhi


Also Read: Legal Aspects of Foreign Venture Capital Investor (FVCI) And Their Relation with Startups

Stamp Duty in the State of Karnataka[3] [4]

The state of Karnataka has a state act in determining the stamps duty rates and the rules thereof. The Karnataka Stamp Act, 1957 in its Schedule has prescribed the stamp duty rates which are:

A.    Agreement or Memorandum of Agreement

If the agreement is related to the sale of immovable property with possession of the property then the stamp duty charges will be at 5% of the market value of the property, whereas, if the agreement is without possession of the property then the stamp duty will be at 0.1% on consideration amount, Min.Rs.500/-, Max. Rs. 20,000/-.

B.    Articles of Association of a Company

The stamp duty will be 0.1% of the value of the company maximum up to Rs. 50 lakhs.

C.    Bond

When the security bond value is less than Rs. 1000 then the stamp duty will be 0.5% of the value of the bond, in any other case, the stamp duty will be Rs. 200/-.

D.    Conveyance Deed

Conveyance wherein sale or sale of flats and apartments will have stamp duty of 5% on the market value with surcharge and cess.

E.    Memorandum of Association of a Company.

If the document is accompanied by the articles of association as under Section 26 of the Companies Act, then the duty will be one thousand rupees. If no document is associated with it then the stamp duty will be one thousand for every ten lakhs or part thereof subject to a maximum of fifty lakhs.

F.     Partnership:

The stamp duty is determined as per the type of instrument used which are:

Instrument of Constitution Rs. 2000
Reconstitution, whereby immovable property contributed as share by a partner or partners, remains with the firm at the time of outgoing in whatever manner by such partner or partners on reconstitution of such partnership firm 3% of the market value remaining with the firm
Reconstitution in other cases Rs 1000
Dissolution whereby the property which belonged to one partner or partners when the partnership commenced is distributed or allotted or given to another partner or partners 3% on a market value equal to the market value of the property distributed or allotted or given to partner or partners under the instrument of dissolution, in addition to the duty which would have been chargeable on such dissolution if such property had not been distributed or allotted or given.
Dissolution in other cases Rs. 1000

G.    Share Warrants

Share warrants which are issued to the bearer as per the Companies Act will levy ha stamp duty of one and half times the duty payable on the conveyance for the market value equal to the nominal amount of the shares specified in the warrant.

Stamp duty in the State of Madhya Pradesh[5]

The Indian Stamp Act, 1899 is applicable in the State of Madhya Pradesh which has prescribes the stamp duty rates under Schedule 1A of the Act which are:

A.    Agreement or Memorandum of Agreement

If the agreement is related to the sale of immovable property with possession of the property then the stamp duty charges will be same as provided under the conveyance head below on the value of the property, whereas, if the agreement is without possession of the property then the stamp duty will be of Rs. 1000/-.

B.    Articles of Association of a Company

Where the company does not have share capital then stamp duty of Rs. 5000 and where the company have nominal share capital or increase share capital then the stamp duty levied will be 0.15 percent of such nominal or increase share capital, subject to a maximum of Rs. 5000 and maximum up to Rs. 25 lakhs.

C.    Bond

A bond not being a debenture then stamp duty of 0.5% of the amount or value secured subject to a minimum of Rs. 500 and where no valuation is possible then Rs. 500.

D.    Conveyance Deed

A Conveyance deed not being a transfer charged or exempted will levy stamp duty of 5% of the market value of the property which is the subject matter of conveyance or the amount of consideration set forth therein, whichever is higher.

E.    Memorandum of Association of a Company.

If the document is accompanied by the articles of association as under Section 5 of the Companies Act, 2013, then the duty will be two thousand five hundred rupees (Rs. 2500/-). If no document is associated with it then the stamp duty will be 0.15 percent of such nominal or increase share capital, subject to a maximum of Rs. 5000 and maximum up to Rs. 25 lakhs.

F.     Partnership:

Where the Instrument is of formation of a partnership, the stamp duty will be based on the value of contribution in the partnership which are:

Contribution Stamp Duty
Less than Rs. 50,000 Rs. 2000
Excess to Rs. 50,000 2% of the share contributed subject to a minimum of rupees two thousand and a maximum of Rs.10,000
Contribution by way of immovable property 2% of the market value of the property

In case of dissolution of the partnership in which a partner retires off and takes any immovable property as his share by a partner other than a partner who brought in that property as his share of contribution in the partnership than a stamp duty of 0.15 percent of such nominal or increases share capital, subject to a maximum of Rs. 5000 and maximum up to Rs. 25 lakhs. In any other cases of dissolution stamp duty of Rs. 1000.

G.    Share Warrants

Share warrants will have a stamp duty one and a half times the duty payable on a conveyance deed of the market value equal to the nominal amount of the shares specified in the warrants.

Conclusion Derived from the Comparisons of the Stamp Duties of the 5 States

From the above comparisons of the stamp duty rates on the above following parameters, that the State of NCT Delhi has the lowest of the Stamp duty applicable and State of Madhya Pradesh having the highest. On the other side, New Delhi has the oldest model of stamp duty whereas Madhya Pradesh being the most updated stamp duties. Also, that, Maharashtra has the most competitive stamp duty as compared to other states.  Out of these, states Delhi, Maharashtra, Karnataka and West Bengal have the most favourable stamp duty provisions.


Dear Reader,

Thank You for reading this article.

If you think this blog post is good and worth reading do share it with your friends and colleagues. You can also send me your suggestions by commenting on this article.

However, if you like to receive Newsletter of our post send us your details by submitting this form below.


[1] http://revenue.delhi.gov.in/wps/wcm/connect/DoIT_Revenue/revenue/home/registration+acts+and+rules/schedule+i

[2] https://wbregistration.gov.in/(S(zzm42c0l2psuob4bxwhndugf))/Stamp_duty.aspx

[3] https://www.karnataka.gov.in/karigr/Pages/-At-a-Glance–Stamp-Duty-and-Registration-Fee.aspx

[4] https://www.karnataka.gov.in/karigr/Documents/Karnataka-Stamp-Act-1957-Schedule.pdf

[5] http://www.lawsofindia.org/pdf/madhya_pradesh/1958/1958MP18.pdf

Leave a Reply

Your email address will not be published.