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APEDA Registration (3)

Stamp Duty on Securities Transactions in India

Key Changes and Compliance Requirements,

The Indian financial landscape underwent a crucial change with the implementation of a uniform stamp duty on securities transactions effective July 1, 2020. The amendments aimed at standardizing tax rates across states, streamlining collections, and preventing double taxation. This article delves into the key aspects of the revised stamp duty framework and its impact on businesses and investors.
The Indian Stamp Act, 1899 was amended to introduce a standardized stamp duty structure for securities transactions executed through stock exchanges, depositories, and over-the-counter (OTC) trades. Unlike the previous system where each state had its own rates, this reform brought uniformity in taxation.

Key Features of the Amended Stamp Duty Rules:

1.Centralized Collection: Collected by exchanges and depositories and remitted to the respective state governments.
2. Uniform Rates: Standardized duty rates applicable across India.
3. Applicability on Multiple Transactions: Covers listed and unlisted securities, transfer, issuance, and buybacks.
4. Impact on Investors & Businesses: Brokers, clearing corporations, and businesses engaged in securities trading must comply with the new rules.
1.Centralized Collection: Collected by exchanges and depositories and remitted to the respective state governments. 2. Uniform Rates: Standardized duty rates applicable across India. 3. Applicability on Multiple Transactions: Covers listed and unlisted securities, transfer, issuance, and buybacks. 4. Impact on Investors & Businesses: Brokers, clearing corporations, and businesses engaged in securities trading must comply with the new rules.

2. Stamp Duty Rates for Different Securities Transactions

Below is a summary of the applicable stamp duty rates for different securities transactions:
Issue of Securities
Stamp Duty Rate: 0.005%
Who Pays? Issuer
Transfer of Securities (Delivery-Based)
Stamp Duty Rate: 0.015%
Who Pays? Buyer
Transfer of Securities (Non-Delivery-Based)
Stamp Duty Rate: 0.003%
Who Pays? Buyer
Derivatives – Futures (text appears slightly corrupted in the image)
Stamp Duty Rate: 0.002%
Who Pays? Buyer
Derivatives – Options
Stamp Duty Rate: 0.003% (on premium)
Who Pays? Buyer
Debenture Issuance
Stamp Duty Rate: 0.0001%
Who Pays? Issuer

3. Impact of New Stamp Duty Rules

The introduction of a uniform stamp duty structure has significantly impacted investors, brokers, and businesses engaged in securities transactions. The key implications include:
1. Increased compliance for stock exchanges and depositories as they are now responsible for collecting and remitting stamp duty.
2, Reduction in multiple state-wise stamp duties, leading to a streamlined tax regime.
3. Additional cost burden on investors, particularly in derivatives and high-frequency trading.
4. Enhanced transparency in the securities market with centralized collection and reporting.

4. Compliance Guidelines for Businesses

Businesses dealing in securities must ensure compliance with the revised rules. Here are some key steps:

✔ Verify the correct stamp duty rate applicable to each transaction. ✔ Ensure timely deduction and payment of stamp duty by stock exchanges and depositories.
✔ Maintain accurate records of stamp duty payments for audit and compliance purposes.
✔ Regularly check regulatory updates to stay compliant with any future changes

Conclusion

The standardized stamp duty framework on securities transactions has brought consistency in taxation, reducing state-wise variations. While it simplifies compliance for businesses, investors must factor in these costs while trading. Understanding the new rates and ensuring adherence to compliance guidelines will help businesses and traders navigate the changes efficiently.
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