Digital Stamping - FAQ

Stamp Duty is a form of “tax” levied by the Government on the execution of instruments.

Instruments that are stamp-able are listed in the Indian Stamp Act, 1899 or in respective state stamp acts (such as The Maharashtra Stamp Act and The Karnataka Stamp Act).

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Under Indian stamping laws, an “instrument” means any “document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded”.

The Indian Evidence Act, 1872, defines a “document” to mean “any matter expressed or described upon any substance by means of letters, figures or marks or by more than any of those means, intended to be used or which may be used for the purpose of recording that matter.”

This wide definition also covers “electronic records” as defined in Information Technology Act, 2000 i.e., data, record, image, sound that is generated, stored, received or sent in an electronic form.

Essentially, any form of agreement, conveyance or deed – whether physical or electronic -  would classify as an “instrument” under stamping laws.

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Under the Indian Stamp Act – execution of an instrument is complete when all parties have “signed” it.

For electronic records, documents are “signed” in one of 2 ways:

a)     By way of electronic signature

b)    By way of any electronic authentication methods

In an electronic flow – execution is deemed to have been complete after the second party signs the document.

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Most States require stamp duty to be paid before or at the time of execution of the document

In some States, for example Maharashtra can also be stamped on the next working day after execution.

If the stamp-able instrument is executed out of India (not being a bill of exchange, or promissory note), then it must be stamped within three months after it has been first received in India.

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Stamp duty is paid by “stamping” instruments that are being executed.

The process of stamping involves 3 steps:

1)     Payment

2)    Defacement

3)    Affixture

Payment

There are 3 modes of payment:

a)     Purchase of eStamp paper

b)    Purchase of adhesive stamps i.e normal stamp paper

c)     Franking an instrument

The availability of the above modes varies from State to State. For example, Karnataka only allows purchase of eStamp paper and franking, Delhi allows only eStamp paper, while Bihar currently only allows adhesive stamps.

Barring Haryana – where stamp paper is 100% digital– all other States give you stamp paper in a physical form.

Defacement

Once stamp paper is purchased – it needs to be defaced in a way that ties it to the instrument being executed. The purpose of this is to prevent the stamp paper from being duplicated and used for two different instruments.

There are 2 common modes of defacement:

1)     Printing part of the agreement on the stamp paper

2)    Writing a legend on the physical stamp paper – describing the instrument for which the stamp paper is being used

Affixture

After a stamp paper is defaced – it needs to be affixed to the instrument. This is usually done by making the stamp paper (or stamp papers – in case multiple stamps are used) the first page of the agreement set.

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To avoid the operational hassles of physical stamping, Leegality has built BharatStamp– the first system in India that allows you to stamp documents digitally in a legally compliant manner.  

Through BharatStamp, you can affix stamp papers digitally in a secure, legally compliant manner.

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Yes. BharatStamp is completely legal and is currently being used by more than 500+ companies across India

None of the stamping laws in India prohibit or bar digital affixture of stamp papers. The only reason stamping has been conventionally physical is because most States have not operationalised digital modes of affixture and not because of any legal bar.

All stamping laws require is for the conditions of ‘defacement, payment and affixture’ to be complied with.

In fact, the State of Haryana has rolled out a 100%digital stamping system – without amending its stamping laws.

Under Section 4 of the IT Act – an electronic copy of a physical document will have the same equivalence as the physical original as long as the physical copy is still accessible for any subsequent reference.

Leegality’s BharatStamp ensures compliance with these requirements by:

1)     Purchasing stamps ONLY from government authorised vendors

2)    Ensuring defacement happens on the physical copy of the stamp paper

3)    Affixing ONLY the digitally rendered copy of the physical, defaced stamp paper

4)    Sending the physical copies (along with defacement) to your organisation for future reference

For more details about our stamping process, please contact us here

Any or all of these consequences may follow if a stamp-able document (including electronic document) is not stamped or not appropriately stamped–

1. It cannot be admitted in evidence before any person having by law (such as courts), or by consent of parties (such as an arbitrator) authority to receive evidence;

2. It cannot be acted upon, registered or authenticated by a public officer (such as for registration);

3. If presented in evidence or to a public officer, these documents can also be impounded;

4. Stamp authorities may levy a penalty which is generally an ad valorem rate, and the maximum penalty could range from between twice the deficient stamp duty to up to ten times;

5. Intentional evasion of stamp duty could also attract imprisonment of up to 6 months; and

6. Authorities may enter upon any premises or seek access from any public officer having custody of registers, books, records, documents, and may seize and impound unstamped documents (including electronic documents).

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In India, the Central Government decides the rates of stamp duty on certain instruments such as bills of exchange, cheques, promissory notes etc. under the Indian Stamp Act, 1899, while the rate of stamp duty for all other instruments (such as agreements, awards, affidavit etc.) is determined by State Governments under the respective state stamp Acts.

Kindly refer to the central and state stamp act applicable to you to ascertain the right amount of stamp duty to be paid on your instrument.

We would strongly recommend consulting your lawyer/legal counsel before finalizing the stamp amount you will pay.

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We would recommend that you consult your lawyer/legal counsel for this question.

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