Stamp Duty

Indian Stamp Act, 1899; respective State Stamp Acts

A state-level tax on legal documents including mortgage deeds, sale deeds, and loan agreements, payable under the Indian Stamp Act, 1899 or respective State Stamp Acts. An unstamped or inadequately stamped document cannot be admitted as evidence in court proceedings. Banks must ensure proper stamping of all security documents.

In practice, stamp duty is the silent killer of recovery cases because the consequence of underpayment surfaces only at the worst moment — when the bank tenders its security document as evidence. An inadequately stamped mortgage deed, loan agreement, or guarantee cannot be admitted in evidence under the Indian Stamp Act, 1899 (or the relevant State Stamp Act), so a tribunal or court may refuse to look at the very instrument the claim rests on until the deficit duty and penalty are paid. For banks, this means verifying at sanction stage that every security document carries the correct state rate, since stamping is a state subject and rates differ across jurisdictions. For borrowers and guarantors, an unstamped or understamped document is a genuine line of defence to test before conceding the debt. SARFAESI enforcement can also falter if the underlying security creation is on a defective instrument. Well-advised lenders confirm proper stamping and registration before relying on any security document.