Stamp duty is a state tax, and the chain into India is drawn to the state.

Stamp duty in India is charged on instruments, not on transactions, under a national law that each state has amended with its own schedule of rates, its own list of chargeable instruments and its own valuation rules, so that a conveyance of land in one state is charged at one rate on one basis and the same conveyance across the state line is charged at another on another. The duty is material: on a conveyance it is a percentage of the higher of the consideration and the state's circle rate for the parcel, and the percentage differs by state by a factor that changes the arithmetic of an exit. The duty reaches the structure in four places. At entry, on the conveyance to the parcel company, where it is a cost of acquisition that the valuation at entry reflects. At the joint venture, where a contribution of land to a company, a development agreement with a share of the built area, and a transfer of shares to the developer are each instruments the state may charge. At the sales, where the off-plan agreements and the conveyances to buyers carry duty the buyers bear and the programme's pricing assumes. And at exit, where a sale of the parcel company's shares may be charged at the state's rate for that, and a sale of the land is charged at the conveyance rate, and the two are compared on the day in that state. The same structure costs different amounts in different cities, and the chain into India is drawn to the state.

This note sets out what the duty is and how it is charged, the state's schedule and the national law, the circle rate as the basis, the four places the duty reaches, the instruments and their forms, the development agreement as a charged instrument, the share sale and the conveyance compared, the registration charge beside the duty, the duty's consequence for an unstamped instrument, the exposure statement's markets chosen with the schedule in hand, the lender's reading, the Gulf platform's reading against the Gulf transfer charges, a comparison, a worked structure as a type, cases, what each party holds, the sequence, questions, terms and what to read.

What the duty is

Stamp duty is a tax on instruments: a document that effects or records a transaction is chargeable with duty at the rate the schedule fixes for that kind of instrument, and the duty is discharged by stamping the document, by impressed or electronic stamp, before or at execution. The instrument is chargeable whether or not the transaction is registered, and an instrument not duly stamped is inadmissible in evidence and may be impounded, with the duty and a penalty collected before it is admitted. The tax is on the paper, and the paper's kind, its consideration and its subject matter fix the rate.

The state's schedule and the national law

The national stamp law provides the framework and a schedule for instruments the union charges; each state has its own stamp law or its own amendments to the national one, with a schedule of rates for conveyances, leases, agreements, powers of attorney, mortgages, partnership instruments and the rest, and with its own definitions of what each instrument is. A conveyance in one state includes a development agreement that confers possession; in another it does not. A lease above a term is charged as a conveyance in some states and as a lease in others. The schedule is the state's, it changes by the state's budget, and counsel in the state reads it as of the date.

The circle rate as the basis

Most states charge the duty on a conveyance on the higher of the stated consideration and a value the state fixes for the parcel's locality: a circle rate, a guideline value, a ready reckoner rate, published by the state and revised periodically. A conveyance at a price below the circle rate is charged on the circle rate, and a transaction priced by the market at a figure the state's table exceeds is charged on the table. The circle rate is the duty's floor and it is also read by the tax law for its own purposes, and a structure reads the parcel's circle rate before it reads the price.

Why the state

India's constitution allocates stamp duty on most instruments to the states, and each state legislates its own rates and administers its own collection, with the union's law providing the framework and charging a few instruments of national character. The allocation is the reason the duty differs by state and the reason it changes with state budgets, and it is the reason a structure's chain into India is drawn to the state: the parcel company is formed where the parcel is, the instruments are drafted to that state's schedule, and the exit is compared on that state's rates. A national reading of Indian stamp duty is a reading of a framework, and the cost is in the state's schedule.

The instrument's kind

The schedule charges by the instrument's kind, and the kind is decided by the instrument's substance under the state's definitions and not by its title. An instrument titled an agreement that conveys possession and a share of the land's value is a conveyance in a state whose definition says so, and the title does not save it. Counsel reads each instrument's substance against the state's definitions, and drafts the substance to the kind the commercial position allows at the lower rate, which is lawful planning where the substance is real and avoidance where it is not. The adjudication procedure, by which the state's stamp authority determines the duty on an instrument in advance, is used where the kind is doubtful, because an adjudicated instrument cannot be impounded for the kind.

The circle rate and the valuation

The circle rate is the state's figure and the platform's valuer's figure is the valuer's, and the two differ: a parcel whose circle rate exceeds its market value is charged on a number nobody would pay, and one whose circle rate is below the market is charged on the price. The tax law reads the circle rate too, treating a sale below it as a deemed gain for the seller and a deemed receipt for the buyer, and the structure's entry and exit prices are read against the circle rate for duty and for tax together. A state that revises its circle rates frequently has an entry cost that moves between the option and the completion, and the sequence's long-stop carries the revision.

The four places

At entry, the conveyance of the parcel to the parcel company is charged at the state's conveyance rate on the higher of the price and the circle rate, with the registration charge beside it, and the cost is capitalised into the parcel's acquisition cost. At the joint venture, a contribution of land to the joint venture company, a development agreement with the developer, a transfer of shares to the developer for its equity or its promote, each is an instrument the state's schedule may charge, at rates that differ by the instrument's form. At the sales, the agreements for sale under the regulator's regime and the conveyances to buyers at completion are charged, in most states on the buyer, and the programme's pricing assumes the buyers' duty as part of their cost. At exit, a transfer of the parcel company's shares is charged at the state's rate on share transfers, which is low in most states, and a conveyance of the land is charged at the conveyance rate, which is high, and the difference is the reason buyers buy companies.

The instruments and their forms

The same commercial step can be drafted as different instruments, and the state charges each differently. A development agreement drafted as a licence to enter and build, with no possession transferred, is charged as an agreement in some states; one drafted as a lease or as conferring possession is charged as a conveyance on the land's value. A contribution of land to a company for shares is a conveyance in most states; a subscription for shares paid in cash with the land bought separately is two instruments at two rates. A joint venture's share of built area, granted to the landowner under a development agreement, is read by some states as a conveyance of a share of the land. Counsel drafts each instrument in the form the state's schedule charges least while delivering the commercial position, and the drafting is the structure's duty planning, within the state's anti-avoidance provisions.

The development agreement as a charged instrument

The development agreement between a landowner and a developer, or between a parcel company and a developer, is the instrument most often charged unexpectedly, because several states treat an agreement that gives the developer possession or a share of the land's value as a conveyance and charge it at the conveyance rate on the land's value. A development agreement drafted in the centre's form, granting the developer rights over the parcel for the programme, is an instrument the state may charge at a rate the programme's budget did not carry. The agreement is drafted by counsel in the state to the state's definitions, and its charge is in the budget.

The share sale and the conveyance compared

At exit the platform sells the parcel company's shares or the parcel, and the duty differs: shares at the state's rate on share transfers, on the consideration; the parcel at the conveyance rate on the higher of the price and the circle rate. The buyer's preference is the share sale, for the duty's saving, and its price reflects the saving; the buyer's diligence is on the company, with its liabilities and its history, which is the share sale's cost. Some states have amended their schedules to charge a transfer of shares in a company whose main asset is land at a rate closer to the conveyance, and counsel reads the state's current position. The comparison is made on the day in the state, and the exposure statement's exit routes carry both.

The registration charge beside the duty

Registration of a conveyance at the sub-registrar's office carries its own charge, a percentage of the value or a fixed sum, beside the stamp duty, and some instruments must be registered to be effective against third parties. The two charges are budgeted together as the transfer cost, and the registration charge's rate is the state's too.

The unstamped instrument

An instrument not stamped, or stamped at a lower rate than the schedule requires, is inadmissible in evidence in any proceeding until the duty and the penalty are paid, and may be impounded by any authority before which it is produced. A development agreement stamped as an agreement in a state that charges it as a conveyance is an instrument the platform cannot enforce against the developer, or produce to the regulator, the lender or the buyer, without paying the difference and a penalty that may be a multiple. The duty's consequence is the instrument's worth as evidence, and an unstamped instrument is a promise the platform cannot prove.

The exposure statement's markets

The exposure statement names the states the platform enters, and the duty schedule of each is read before the states are named, because the duty changes the programme's return: a state with a high conveyance rate and a low share-transfer rate favours exit by share sale and entry by company acquisition; one that charges development agreements as conveyances favours a different joint venture form; one with frequent circle rate revisions has an entry cost that moves. The statement's markets are chosen with the schedule in hand, and a state whose schedule makes the programme's arithmetic fail is a state the statement excludes or prices.

The lender's reading

A lender's mortgage is an instrument charged under the state's schedule, at a rate on the secured amount, and the mortgage's registration carries its charge; a lender that takes security in three states pays three schedules. The lender reads the platform's instruments for their stamping, because an unstamped development agreement is a security the lender cannot rely on, and its conditions precedent include the stamping of every instrument in the chain.

The Gulf platform's reading

A Gulf platform knows transfer charges: each Gulf state charges a transfer of land at its registry at a rate, on the consideration or the registry's valuation, and the charge is a fact of the state. The Indian duty is the same fact with three differences: it is charged on instruments rather than transfers, so that a development agreement or a contribution is charged as well as a conveyance; it differs by state within one country; and an unstamped instrument is inadmissible, which the Gulf registries' charges do not produce. The platform's discipline on Gulf transfer charges extends to India with the instrument's form as the new variable.

By place · by instrument	The instrument	The basis	Who bears it	The form that matters
Entry	Conveyance to the parcel company	Higher of price and circle rate	The buyer, the platform's company	Conveyance or company acquisition
Joint venture	Contribution of land	The land's value	The contributor or as agreed	Contribution or separate purchase
Joint venture	Development agreement	The land's value where read as a conveyance	The parties as agreed	Licence or possession
Joint venture	Transfer of shares to the developer	The consideration	The transferee	Shares or a class issued
Sales	Agreements for sale and conveyances to buyers	The unit's price or circle rate	The buyers	The regulator's form
Exit	Transfer of the company's shares	The consideration	The buyer	Shares
Exit	Conveyance of the parcel	Higher of price and circle rate	The buyer, priced into the offer	Land
Financing	Mortgage	The secured amount	The borrower	The security's form

A structure, as a type

A platform considers two states for a residential programme. Counsel in each reads the schedule: the first charges conveyances at a high rate on the circle rate, development agreements as agreements, and share transfers at a low rate; the second charges conveyances lower, development agreements conferring possession as conveyances, and share transfers in land-holding companies at a rate near the conveyance. The exposure statement names both with the duty priced into each entry and exit. In the first state the platform acquires by conveyance into a parcel company, drafts the development agreement as a licence, issues the developer a class of shares rather than transferring any, and plans the exit by share sale; in the second it acquires an existing company where one holds the parcel, drafts the development agreement without possession, and plans the exit by conveyance priced net of the buyer's duty. Every instrument is stamped at the state's rate before execution, the lender's counsel confirms the stamping, and the budget carried each state's figures. The same programme cost different amounts in the two states, and the structure paper said how much.

The structure paper's page

The structure paper's page per state carries the schedule summary: the conveyance rate and its basis, the circle rate's practice and revision, the treatment of development agreements, contributions, leases and share transfers, the registration charges, the mortgage duty, the adjudication procedure, the anti-avoidance provisions, and the exit comparison's method. The page is written before the exposure statement names the state, refreshed at each state budget, and it is the page each instrument is drafted from.

The second programme's reading

A manager's second Indian programme is raised on the first's duty record: whether the budget at the four places held, whether an instrument was ever impounded, whether the exits were compared on the day, whether a market was named before its schedule was read. A first programme whose duty was a fact of the state, budgeted and stamped, is a programme whose holders accept the second's markets on the schedules; one whose development agreement was impounded in court is a programme whose holders ask for the second's page per state before the seed.

Four cases, as types

A platform drafts its development agreement in the centre's form, granting the developer possession for the programme, in a state that charges such an agreement as a conveyance. The agreement is stamped as an agreement; three years later the developer defaults, the platform produces the agreement in court, it is impounded, and the duty on the land's value with a penalty is settled before the claim is heard.

A platform plans its exit by conveyance in a state whose conveyance rate is high, pricing the buyer's duty into its expectations from a different state's schedule. The buyer's offer is net of the state's actual duty, and the difference is the platform's return on that parcel.

A platform contributes a landowner's parcel to a joint venture company for shares, in a state that charges the contribution as a conveyance on the land's value, without budgeting it. The duty is a cost of formation the joint venture did not carry, and the landowner and the platform dispute who bears it.

A platform reads each state's schedule before naming its markets, drafts each instrument to the state's definitions, stamps each before execution, compares the exit routes on the day in the state, and budgets the duty at each of the four places. The duty was a fact of the state, treated as one.

What each party holds

The platform holds the exposure statement's markets chosen with the schedule in hand, the budget at the four places and the exit comparison per state.

Counsel in each state holds the schedule as of the date, the definitions, the circle rate and the drafting of each instrument to them.

The developer holds the development agreement in the form the state charges as drafted, and its share of the duty as agreed.

The landowner holds the contribution's form and its duty as allocated.

The buyers hold their duty on their agreements and conveyances, assumed in the pricing.

The lender holds the stamping of every instrument in the chain as a condition precedent.

Where it surfaces

It surfaces at the exposure statement's markets, when the states are named before the schedules are read. It surfaces at the entry's budget, in the circle rate. It surfaces at the development agreement, in the state's definition of conveyance. It surfaces at the contribution, in the joint venture's formation cost. It surfaces at the buyers' pricing, in their duty. It surfaces at the exit comparison, in the share sale's rate. It surfaces at the lender's condition precedent. And it surfaces in court, when an instrument is impounded.

The cost of getting it wrong

An unbudgeted duty costs the programme's return at the place it was missed; an unstamped instrument costs the duty, the penalty and the claim's delay; an exit compared on another state's schedule costs the difference in the buyer's offer; and a market named before its schedule was read costs a programme whose arithmetic fails in that state. The cost of the discipline is counsel's reading per state before the statement, a budget line at four places, the drafting of each instrument to the definitions, and the stamping before execution.

The committee's reading

The committee reads each state's schedule summary before the exposure statement names it, the duty budget at the four places for each parcel, each instrument's kind and its stamping before execution, each contribution's and development agreement's charge, and the exit comparison per state on the day. It reads the adjudication certificate where an instrument's kind was doubtful. And it reads the lender's stamping conditions as met. A committee that reads the duty as a fact of the state reads it where it sits, which is in every instrument.

A timeline, as a type

At design counsel in two states reads the schedules and the circle rates, and the exposure statement names both with the duty priced. In month three the first parcel is conveyed into its company in the first state, stamped on the circle rate, registered, the cost capitalised. In month six the development agreement is drafted as a licence, adjudicated as an agreement, and stamped. In month seven the developer's equity is a class issued, not a transfer. In year two the buyers' agreements under the regulator's regime carry their duty in the pricing. In year four the lender's mortgage is stamped and registered. In year six the exit is compared on the day: the share sale at the low rate, the buyer's diligence on the company, and the conveyance at the high rate; the share sale completes. In the second state, the same steps on a different schedule produced different figures, and the budget carried both.

The sequence

1. Counsel in each state reads the schedule, the definitions and the circle rates before the exposure statement names the markets.
2. The duty is budgeted at entry, at the joint venture, at the sales and at exit, per state.
3. Each instrument is drafted to the state's definitions in the form the schedule charges least while delivering the commercial position, within the anti-avoidance rules.
4. Each instrument is stamped at the state's rate before execution and registered where registration is required.
5. The exit routes are compared on the day in the state, share sale against conveyance, net of the buyer's duty.
6. The lender's conditions precedent on stamping are met for every instrument in the chain.

Questions a manager asks

Can the duty be avoided by executing the instrument outside the state. An instrument relating to land in a state is chargeable under that state's law when it is brought into the state or relates to property there; counsel reads the rules on instruments executed elsewhere, and the answer is usually that the state's duty applies.

Is a share sale always cheaper. In most states; some have moved to charge land-holding companies' share transfers nearer the conveyance rate, and counsel reads the current schedule.

Who bears the duty between the parties. As the instrument provides; the state collects from whoever is liable under its law, usually the transferee, and the allocation between the parties is contractual.

What is the penalty for an unstamped instrument. A multiple of the deficit in most states, collected before the instrument is admitted; the instrument is worthless as evidence until then.

Does the duty apply to the fund's own units abroad. No; the units are not an instrument relating to Indian property, and a transfer of the fund's units is outside the state's schedule, subject to the tax law's indirect transfer rules.

How often do schedules change. With the state's budget, annually or more often; the budget is refreshed at each instrument.

Terms used

Stamp duty: the state's tax on instruments, charged by the schedule's rate on the instrument's kind and basis.

Schedule: the state's list of chargeable instruments and rates, as amended by the state.

Circle rate: the state's published value for a locality, the floor for the duty on a conveyance.

Conveyance: the instrument transferring land, charged at the highest rate, and in some states including development agreements that confer possession.

Impounding: the authority's seizure of an unstamped instrument until the duty and the penalty are paid.

Registration charge: the sub-registrar's separate charge for registering an instrument, beside the duty.

What to read

The national stamp law and each state's stamp law and schedule as amended; the state's circle rates; the state's definitions of conveyance, lease and development agreement; the registration law's charges; the anti-avoidance provisions on instruments executed outside the state; the tax law's rules that read the circle rate. On this site, the development structures, sectors and lexicon rooms.