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Stamp duty on agreements in India, explained

Last reviewed

Usually payable
Short answer

Most written agreements in India attract stamp duty under the Indian Stamp Act, 1899 or the relevant state stamp law. The duty depends on the type of instrument and the state, and must be paid before or at the time of signing. Unless the parties agree otherwise, the Act sets who pays. Unstamped agreements are not admissible in evidence until duty and penalty are paid.

The law this relies on

Indian Stamp Act, 1899

Sections 3, 17 and 29

Instruments chargeable with duty, timing of stamping and who bears the duty by default.

Indian Stamp Act, 1899

Sections 33, 35 and 40

Impounding, inadmissibility of unstamped instruments, and penalty of up to ten times the deficit.

Indian Stamp Act, 1899

Schedule I, Article 5

Duty on an agreement or memorandum of agreement not otherwise provided for (state rates differ).

Explained

Which agreements need stamp duty?

Every “instrument” listed in the Schedule to the applicable stamp law is chargeable. Generic agreements and memoranda usually fall under the “agreement or memorandum of an agreement” article (Article 5 in the central Schedule), while specific instruments have their own articles: leases, conveyances, mortgages, bonds, powers of attorney, partnership deeds, indemnity bonds and so on. Loan agreements, guarantees and share transfers also have dedicated entries in many states.

How much is the stamp duty?

Rates are set by each state and can be a fixed amount (common for simple agreements, affidavits and NDAs) or a percentage of the consideration, rent or loan amount, sometimes with a cap. The same document can attract very different duty in different states, so always use the rate in force where the instrument is executed or chargeable on the date of execution.

When and by whom must stamp duty be paid?

Section 17 of the Indian Stamp Act requires instruments executed in India to be stamped before or at the time of execution; there is a short window for instruments executed outside India. Section 29 sets default liability: for example, the lessee pays on a lease, the purchaser on a conveyance and the person drawing or making a bond. Parties can agree a different split in the contract.

What if an agreement is not stamped or is under-stamped?

Under Section 35, an instrument that is not duly stamped is not admissible in evidence and cannot be acted upon by a person having authority to receive evidence, until the deficit duty and a penalty are paid. Section 33 lets courts and public officers impound such instruments, and penalties under Section 40 can go up to ten times the deficit. Stamp-duty evasion with intent to defraud is also an offence.

Checklist

  • { "item": "Identify the instrument type", "detail": "Match the document to the right article of your state’s Schedule; a lease is not an “agreement” for stamp purposes." }
  • { "item": "Fix the chargeable state", "detail": "Usually where it is executed, or where the property is located for property documents." }
  • { "item": "Calculate the duty on the right base", "detail": "Consideration, rent, security deposit or loan amount, as the article requires." }
  • { "item": "Pay before signing", "detail": "Buy the e-stamp or franking before execution and keep the certificate with the original." }
  • { "item": "Allocate cost in the contract", "detail": "State who bears stamp duty and registration charges to avoid default allocation disputes." }

Frequently asked questions

Is stamp duty mandatory on all agreements?

Almost every written agreement is chargeable under some article of the stamp Schedule, though a few are exempt. Oral agreements are not instruments and so are not stamped, but they are harder to prove.

Who pays stamp duty on an agreement?

The parties can agree who pays. If they do not, Section 29 of the Indian Stamp Act (or the state equivalent) sets the default — for example the lessee on a lease and the purchaser on a conveyance.

Can stamp duty be paid after signing?

Duty should be paid before or at execution. An agreement stamped later is treated as executed unstamped and may attract penalty when produced before a court or authority.

Does an e-signed agreement need stamp duty?

Yes. Stamp duty depends on the instrument, not the way it was signed. E-signed agreements are commonly paired with an e-stamp certificate.

This guide is general information about Indian law, not legal advice for a specific dispute, document or jurisdiction. Laws and rules change by notification; for a decision with legal or financial consequences, consult a qualified advocate.

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