Central government intends to replace the Indian Stamp Act, 1899

Context: The government is suggesting replacing the Indian Stamp Act of 1899 with a new law for stamp duty in India.

Indian Stamp Act, 1899:

• The Indian Stamp Act, 1899 is a law that governs the taxation of transactions through the use of stamps on documents.
• An instrument, as defined by the Act, includes any document that creates, transfers, limits, extends, extinguishes, or records rights or liabilities.
• A stamp, as defined by the Act, is any mark, seal, or endorsement authorised by the State Government, including adhesive or impressed stamps used for the purpose of charging duty under this Act.

Stamp duty:

• Stamp duty is a government tax that is charged to register documents like agreements or transaction papers.
• There are two types of stamp duty: fixed duty, which is a set amount based on the nature of the document, and ad valorem duty, which is a percentage of the agreement value.
• Stamp duties can be applied to various documents such as bills of exchange, cheques, promissory notes, and insurance policies.
• The Centre levies the stamp duties, but the states receive the funds within their territories.

Why is the Indian Stamp Bill, 2023 being proposed?

• Accordingly, with the introduction of Pre-constitution Act under British rule which seems to have lost its relevance in this digital age the country lives.
• The Act is ambiguous and intricate, therefore for any users to be able to interpret its provisions so as to implement the mandates therein becomes quite impossible.
• It is complexities and thus, it makes it in the course of its processes lean to lower efficiency and general slow down which delays the entire process.
• Tax avoidance can be based on the loopholes provided by the Act to a certain extent; loss for the government and inequity between taxpayers who follow it.
• Furthermore, the stamp duty rates have not been adjusted in a consistent process and this has led to some improprieties in the system.
• Technology is a modern phenomenon alien to the Act because it does not touch on digital age financial technology as specific forms of financial transactions.
• Lastly, there are regional disparities in the rates and procedures by which stamp duties have to be paid in different states that lead market distortions and hurt inter-state trade.

Key points of the Bill:

• The aim of this initiative is to make stamp duty payment and administration procedures simpler by simplifying the language, structure, and processes involved.
• Digital e-stamping refers to electronically generated impressions that indicate the payment of stamp duty through online means.
• The terms “executed” and “execution” will now mean “signed” and “signature” and will include attribution of electronic records and electronic signatures.
• Electronic records are defined as data, records, or images stored, received, or sent in electronic form.
• Digital or electronic signatures authenticate electronic records through electronic methods or procedures.
• The maximum penalty for contravening any provisions of the law will be increased from Rs 5,000 to Rs 25,000, and a daily penalty of Rs 1,000 will be imposed for repeated offences.

Source: Indian Express

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