Drafting, Pleadings and Appearances · Drafting of Agreements, Deeds and Documents

Stamp Duty on Agreements, Deeds and Instruments

Updated 11 October 2026 · Fact-checked

Stamp duty is a tax on instruments, charged under the Indian Stamp Act, 1899 at the rate set in Schedule I (or the State's schedule). To solve a question, identify the instrument, its article, the person who bears the cost under Section 29, and any special rule, such as Section 23A, which treats certain mortgage-linked instruments as agreements.

Understand Stamp Duty on Agreements, Deeds and Instruments

Stamp duty is a tax on the instrument, not on the transaction. The Indian Stamp Act, 1899 lists instruments in a Schedule, and each is charged either a fixed duty or an ad valorem duty (a duty based on value). The rate depends on the article that fits the instrument. States have amended the Act and their own rates, so always say that the State's schedule applies.

Several rules sit around the charge. Section 29 says who bears the cost of the stamp when the parties have not agreed otherwise. For example, a mortgage-deed is stamped at the cost of the person executing it, a conveyance at the cost of the grantee, and a lease at the cost of the lessee. Parties can agree differently, because the rule applies only in the absence of an agreement to the contrary.

Section 4 deals with a single transaction that uses several instruments, such as a sale, mortgage or settlement. Only the principal instrument bears the full duty. Each other instrument bears a duty of one rupee (some States change this figure). The parties may decide which instrument is principal, but then the duty is the highest duty that would apply to any of the instruments. For issue, sale or transfer of securities, the instrument chargeable under Section 9A is the principal instrument and no duty is charged on other instruments of that transaction.

Section 21 fixes how securities are valued. Duty is calculated on the market value of the stock or security. For options, the value is the premium paid by the buyer. For repo on corporate bonds, it is the interest paid by the borrower. For a swap, it is only the first leg of the cash flow.

Section 23A covers a special case. An instrument that is not a promissory note or bill of exchange, and is given on a deposit of a marketable security as security for a loan or debt, is charged as an agreement under Article 5(c) of Schedule I. The same applies to an instrument that makes redeemable, or qualifies, a duly stamped transfer of a marketable security intended as security. A release or discharge of such an instrument bears only the like duty. Stamping is separate from registration, which is why Section 48 of the Registration Act, 1908 matters: a duly registered non-testamentary document takes effect against an oral agreement, unless possession was delivered and a valid transfer resulted.

Key rules to remember

Section 23A(1) charge: Instrument on deposit of marketable security, or making a security-transfer redeemable → duty as an agreement under Article 5(c); Does not apply to a promissory note or bill of exchange. Himachal Pradesh refers to Schedule I-A.
Section 23A(2): Release or discharge of such instrument → only the like duty; Do not charge it as a reconveyance or at a higher rate.
Section 21 valuation: Duty base = market value of stock or security; Options: premium paid by buyer. Repo on corporate bonds: interest paid by borrower. Swap: first leg of cash flow only.
Section 4 single transaction: Principal instrument: full duty. Other instruments: ₹1 each; Applies to sale, mortgage or settlement. Some States change the ₹1 (Himachal Pradesh ₹2, Orissa ₹10, Manipur ₹2.50). If parties choose the principal instrument, duty is the highest applicable.
Section 4(3) securities: Issue, sale or transfer of securities → the Section 9A instrument is principal; no duty on other instruments; Overrides Section 4(1) and (2).
Section 29 who pays: Absent agreement: mortgage-deed, bond, release, settlement, etc. → executant; conveyance → grantee; lease → lessee; exchange → parties equally; sale of security via exchange → buyer; issue of security → issuer; Applies only if there is no agreement to the contrary. Uttarakhand adds a gift instrument, paid by the donee.

How to solve Stamp Duty on Agreements, Deeds and Instruments questions

Use this method for any case-based question on stamp duty. Show the provision, apply it to the facts, then conclude.

1Identify the instrument and its true nature. Look at what it does, not what it is called.
2Check for a special rule: Section 23A (security-linked instruments), Section 4 (several instruments) or Section 21 (valuation of securities).
3Find the article and rate in Schedule I or the relevant State schedule. If no figures are given, say the rate is as per the applicable schedule.
4Fix the value on which duty is charged. For securities, use market value, or the special base for options, repos and swaps.
5Apply Section 29 to decide who bears the stamp, unless the parties have agreed otherwise.
6If several instruments are used, name the principal instrument and charge the others at the nominal duty.
7State the consequence and drafting point: stamp before or at execution, and register where required.
8Conclude in one clear line that answers the question asked.

Quickest way: Four-question stamp duty check

When to use it: Use it when time is short and the question gives a short fact pattern with a mortgage, security or multiple documents.

Is it a mortgage or security deposit? If it is not a promissory note or bill of exchange, think of Section 23A.
Is more than one document used for one sale, mortgage or settlement? Name the principal instrument under Section 4.
Is the subject a security? Use market value under Section 21.
Who pays? Quote the Section 29 rule and add the words 'in the absence of an agreement to the contrary'.

Common mistakes in Stamp Duty on Agreements, Deeds and Instruments

Applying Section 23A to a promissory note or bill of exchange.
Students remember 'security for a loan' and skip the exclusion in the opening words.
Fix: Read the exclusion first. A promissory note or bill of exchange is outside Section 23A(1).
Charging a release or discharge under Section 23A at a different or higher duty.
Students treat a release as a new principal instrument.
Fix: Section 23A(2) says a release or discharge of such an instrument is chargeable only with the like duty.
Charging full duty on every document in one sale or mortgage.
Students forget that only the principal instrument bears full duty.
Fix: Apply Section 4: principal instrument full duty, each other instrument ₹1 (subject to State amendments).
Saying the seller or executant always pays the stamp duty.
Students ignore the distinct heads in Section 29.
Fix: Match the instrument. A conveyance is paid by the grantee, a lease by the lessee, an exchange equally by the parties. State that the rule yields to a contrary agreement.
Valuing securities at the face value or the price on the instrument.
Students use the old averaging approach or the face value.
Fix: Use market value under Section 21, with the special bases for options (premium), corporate bond repo (interest) and swap (first leg).
Quoting exact duty rates without being given them.
Students try to recall figures that differ from State to State.
Fix: Unless the question gives rates, refer to the applicable Schedule or State rate and show the method.

Worked examples

Example 1

Sharma Textiles Pvt Ltd borrows from a bank and deposits shares in a listed company as security. The bank takes a letter from the company recording the deposit and the terms of repayment. The letter is not a promissory note or bill of exchange. How is it chargeable to stamp duty? What about the later release of the letter?

Show the solution

Provision: Section 23A(1)(a) covers an instrument, not being a promissory note or bill of exchange, given on the occasion of the deposit of a marketable security as security for money advanced or to be advanced by way of loan, or for an existing or future debt.
Facts: the letter was given when the shares were deposited as security for a loan, and it is not a promissory note or bill of exchange.
Application: the instrument is chargeable as if it were an agreement or memorandum of an agreement under Article 5(c) of Schedule I (or the State schedule where State law applies).
Release: under Section 23A(2), the release or discharge of this instrument is chargeable with the like duty only.

Answer: The letter is chargeable as an agreement under Article 5(c) of Schedule I. Its later release or discharge bears only the like duty.

Example 2

Mehta and Rao complete the sale of a factory using a sale deed, a separate possession letter and a supplementary agreement. They do not designate the principal instrument. The duty on the sale deed is ₹3,00,000. They propose to designate the possession letter as principal to save duty. Advise them, assuming the standard ₹1 duty for other instruments.

Show the solution

Provision: Section 4(1) says that where several instruments complete one sale, only the principal instrument bears the duty for a conveyance, and each other instrument bears ₹1.
Choice: Section 4(2) allows the parties to decide which instrument is principal.
Limit: the proviso says the duty on the chosen instrument shall be the highest duty chargeable on any of the instruments employed.
Application: the highest duty is ₹3,00,000, on the sale deed. Designating the possession letter as principal would still mean duty of ₹3,00,000 on it.
Result: the other two instruments bear ₹1 each, so total duty is ₹3,00,000 + ₹1 + ₹1 = ₹3,00,002.

Answer: They may choose the principal instrument, but the duty cannot fall below the highest duty, ₹3,00,000. The other two instruments bear ₹1 each, so the total is ₹3,00,002, subject to any State variation.

Exam tips

Quote the section and its exact condition first, then apply it to the facts. Examiners reward the structure of provision, analysis and conclusion.
In Section 23A answers, state the exclusion (promissory note or bill of exchange) and the two limbs (deposit of security, and redeemable or qualified transfer).
Do not invent rates. If the question gives none, say that duty is as per the applicable Schedule or State rate and show the method.
Mention State amendments briefly (such as the Himachal Pradesh reference to Schedule I-A or the changed ₹1 figure) only when they are relevant to the facts.
Add a drafting point: confirm the stamp before execution and link to registration where the document needs it.

Practice questions from Drafting of Agreements, Deeds and Documents

Stamp Duty on Agreements, Deeds and Instruments in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalStamp Duty on Shares and Marketable Securities

Stamp Duty on Agreements, Deeds and Instruments: frequently asked questions

What does Section 23A of the Indian Stamp Act say?

It makes certain instruments connected with mortgages of marketable securities chargeable as agreements under Article 5(c) of Schedule I. These are instruments given on the deposit of a security for a loan or debt, or instruments that make a duly stamped security transfer redeemable. A promissory note or bill of exchange is excluded.

Who pays the stamp duty on a deed?

Section 29 says that, absent an agreement to the contrary, the person executing a mortgage-deed, bond, release or settlement pays. The grantee pays on a conveyance and the lessee on a lease. The parties can agree otherwise.

How is stamp duty on securities valued?

Section 21 uses the market value of the stock or security. For options it is the premium paid by the buyer, for repo on corporate bonds it is the interest paid by the borrower, and for a swap it is only the first leg of the cash flow.

What if several documents are used for one sale or mortgage?

Under Section 4 only the principal instrument bears the full duty, and every other instrument bears ₹1 unless a State has changed that amount. The parties can choose the principal instrument, but the duty is then the highest duty that applies to any of the instruments.