The answer might surprise you, even if a signed contract is not stamped, it is actually VALID under the law. Then why do we need to stamp it? Pursuant to section 52 1 a of the Stamp Act , no instrument shall be admitted in evidence unless such instrument in duly stamped.
In other simple words, without stamping on the documents themselves, you are unable to rely on them in a court of law. If you wish to submit an unstamped document to court as evidence, you would have to stamp the document and pay the late stamping penalty to the Inland Revenue Board LHDN. Late Stamping Penalty. Though the rate of stamp duty varies from state to state, the general underlying principle behind the duty remains the same.
Stamp duty is a legal tax that has to be paid in full for the completion of a transaction. Generally, the stamp duty is paid by the buyer, in some cases, the buyer and seller decide to split the stamp duty as per an earlier signed agreement. Stamp duty in India is governed by two legislations, i. According to Article read with Schedule VII of the Indian Constitution , Parliament can enact laws relating to rates of stamp duty of bill of exchange, cheques, promissory notes, bill of lading, letter of credits, policies of insurance, transfer of shares, debentures, proxies, and receipts whereas state legislature can legislate on all those matters which are not mentioned above.
Under Section 3 of the Parliament Legislation the Indian Stamp Act stamp duty can be imposed on the following document:. Under Section 3 of the Indian Stamp Act, , stamp duty will not be imposed on the following documents:. Under Section 3 of the State Legislation Karnataka Stamp Act, , stamp duty will be imposed on the following documents:.
Under Section 3 of the State Legislation, stamp duty will not be imposed on the following documents:. Generally, it is easy to calculate stamp duty according to the rates provided by the Indian Stamp Act or the State Stamp Act. But sometimes, the person paying the duty is not able to calculate the correct stamp duty and ask for help from the collector of Stamps. So, for calculating the stamp duty the first thing is to identify in which category the document or instrument falls under.
For the purpose of stamp duty calculation, there are 3 categories of transaction:. In the first category, the charges on the stamp duty remain fixed regardless of what value is mentioned in the document or instrument. In the second category, the charges of the stamp duty are dependent upon the value mentioned in the document. In the third category, the charges of the stamp duty are dependent either on true market value or on the value mentioned in the document, whichever is higher.
For example, Agreement for sale, agreement for the development, Gift exchange, Deed of partnership, Transfer of Immovable Property, Deed of trust, Partition, etc. Liability can be imposed by agreement on either of the parties of the agreement for payment of the stamp duty. Section 29 of the parliament legislation provides the power to the parties of agreement to decide who among the parties of the agreement shall be liable to pay the stamp duty imposed on the concerned agreement, which, in absence of an agreement, imposes on certain persons the liability of paying stamp duty.
Similarly, Section 30 of the state legislature provides a choice to the parties of the agreement to decide who among the parties of the agreement shall be liable to pay the stamp duty imposed on the concerned agreement and which in absence of any such agreement, impose on a particular party the liability of paying stamp duty.
It is logical to pass the burden of paying the stamp duty on the party who is paying the consideration under the agreement, as stamp duty is the cost to the subject matter of the agreement. Both the parliament and state legislature provide that an unstamped or inadequately stamped document will not be enforceable in a court of law as evidence.
As we are all aware, the importance of having a written contract is to ensure that the terms of any agreement under any transactions are documented. We will feel safe thinking that when there is any dispute arises under the said contract, our rights and interests remained to be protected. However, would the agreement still be enforceable in a circumstance where it is not stamped?
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