Why do you need stamping?

Certain transactions such as buying, selling or leasing property, power of attorney, business
agreements need to be documented, especially those that has a financial aspect to it. But even if
you write the agreement details on paper, and have signed how do you ensure that other party (or
relatives of other party) does not back out or comes back to claim that transaction did not take
place. Many types of documents are only valid if printed on a specific value stamp paper (Rs. 10,
Rs. 100, Rs. 500 and so on). The sale of these papers generates revenue for the government and
acts as a kind of transaction tax. Paying stamp duty is an essential part of almost any transaction
you do, from buying or selling a house to setting up a business agreement, all Agreements, Bonds,
Powers of Attorney etc.
What is stamp duty?
The levy of stamp duty is a state subject and thus the rates of stamp duty vary from state to state.
The Centre impose stamp duty on specified instruments and also fixes the rates for these
instruments.
The payment of proper stamp duty on a document creates its legality. Such document is admissible
as evidence in a court of law. Documents that are not properly stamped, or are unstamped, are not
admissible as evidence. Some of the Documents for which stamp duty must be paid are Affidavit,
Divorce, memorandum of marriage etc.
Stamp duty is one of the major sources of revenue for every state. It must be ensured that, in any
event, stamp duty is purchased in the name of a person or company who is party to the document.
If this does not happens, it will be treated as a document executed (signed) on unstamped paper.
To get a refund for an unused stamp paper, you must file a claim within six months from the date
of purchase of the stamp paper.
Terms associated with stamp and stamp duty
Instrument means any document by which any right or liability is, or purports to be, created,
transferred, limited, extended, extinguished or recorded.
Execution means putting signatures on the instruments by the person/persons executing the
instruments.
How is stamp duty calculated?
Stamp duty is payable as per the rates provided in the Stamp Act or the State Stamp Act and pay
accordingly. First step to calculate the Stamp duty is to identify which category the document or
instrument falls under.
There are three categories of transaction for the purpose of stamp duty calculation:

Under the first category, the stamp duty remains fixed no matter what value is mentioned in the
document or instrument. Examples of such instruments are Administration Bond, Affidavit,
Adoption Deed, Appointment in Execution of Power, Divorce, Apprenticeship Deed, Award,
Article of Clerkship, Cancellation Deed, Duplicate, Charter Party, Copy of Extracts, Indemnity
Bond, Power of Attorney, etc.
Under the second category, Stamp duty charges are dependent upon the value mentioned in the
document. Such documents are Mortgage Deed, Lease Agreement, etc.
Under the third category, the Stamp duty depend either on the value mentioned in the document
or on the true market value, whichever is higher. Instruments like Conveyance, Agreement for
sale, Gift exchange, Partnership Deed, Development Agreement, Transfer of Immovable
Property, Trust Deed, Partition, and so on.
Who pays stamp duty?
In the absence of any agreement to the contrary, the purchaser/transferee has to pay stamp duty or
in case of exchange of properties, both parties have to bear stamp duty equally.
How to pay stamp duty?
There are three ways to pay stamp duty. However, not all states have all three options available. If
all methods are available, all are recognized legally and the choice is with the individual(s)
concerned.
Paying Tax by means of stamp papers, notarization and registration are three different things. For
example: Possession is the physical transfer of the property, but it is not sufficient. You also need
to have legal evidence of ownership. For this you will have to get the property registered in your
name in the local municipal records, with the seller documenting that the property is being
transferred to you. At the time of registration, you will also have to pay a stamp duty which is a
government tax levied on property transactions. A person is considered the lawful owner of a
property/vehicle only after he gets it registered in his name. Stamp duty is collected on the basis
of property value at the time of registration. Stamp duty’s amount varies from state to state and
also property type—old or new.
Notarisation is the act of a notary public authenticating by his signature and official seal, certifying
the due execution in his presence of a deed, contract or other writing, or verifying some fact or
thing about which the notary public has definite knowledge. Documents are notarized to certify
their genuineness and prevent fraud and to make sure they are properly executed. The Notary is
considered as an impartial witness who verifies signers and ensures they have entered into
agreements knowingly and willingly. In short, its objective is to determine everything is true and
genuine on the document.
Registration means recording of the contents of the document. Registration of document acts as
notice to the general public. The object of registration is conservation of evidence and title.
Stamp duty is a legal tax payable in full and acts as an evidence for any financial transaction such
as sale or purchase of a property. Stamp paper must be purchased in the state where the document
is executed.