Important Keywords: Stamp duty on share certificates, Franking of share certificates, stamping in India, SHCIL e-stamp portal, Indian Stamp Act, 1899, Uniform stamp duty rate India, Stamp duty on issue of shares, Stamp duty on transfer of shares, Stamp duty on demat shares, Stamp duty on physical shares, Online stamp duty payment for shares, Franking vs stamping difference, Digital franking meaning, Machine franking of documents, Manual franking process, Stamp duty rates on shares India, Penalty for late payment of stamp duty, Stamp duty due date for share certificates, E-stamp certificate meaning.
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Table of Contents
Overview
When we hear the terms stamping and franking, many of us being confused. What do these actually mean? Why are these required on important documents? And are these really necessary?
In simple terms, stamping and franking are two ways of paying stamp duty (which means, both are methods of paying stamp duty, i.e. a mandatory government tax), which is a government tax on certain legal documents. Both serve the same purpose—to prove that stamp duty has been paid—but they differ in how the payment is made, how easy to use it, and their convenience.
Paying stamp duty is important because a document without proper stamping or franking may not be legally valid and can be challenged in court.
This is especially critical when issuing share certificates. A certificate without proper stamping is like a contract without a seal—open for disputes and penalties later.
This article explains, in easy way, what stamping and franking are, why they matter, how they work, and how to choose the right method for your documents. It also highlights the importance of stamp duty in areas like share certificate issuance, where non-compliance can lead to penalties and legal challenges.
Whether you’re a startup founder, business owner, or legal professional, this guide will help you stay compliant—without confusion or wasting time or effort.
"Uniform stamp duty across the country"
Let’s see the meaning of “uniform.” Earlier, state governments had the power to charge stamp duty on share certificates and share transfers. This meant the rate of stamp duty was different in each state, which was often confusing.
But now, from 1st July 2020, the government has introduced a uniform stamp duty rate for all states. This means no matter where you are in India, the rate is the same for issuing or transferring shares.
For example:
In Delhi, the stamp duty on share certificates (physical or demat) used to be 0.1%. Now, it has been reduced to 0.005% and is the same across all states.
What is Stamp Duty?
Stamp duty is a government tax you pay on certain documents to make them legally valid. This includes things like property sales, leases, loan agreements, partnership deeds, and other contracts.
Paying stamp duty proves the document is official and makes it acceptable in court. If a document is not properly stamped, it may be invalid and could lead to penalties. This is how we know the stamp duty applicable on documents. Paying stamp duty gives legal value to the documents. After stamp duty is paid, the documents become legally valid and can be presented in court. The court accepts these documents as valid.
What is Franking?
Franking is a mark which is showing that you have paid the stamp duty on this document. It is the process of stamping or marking a share certificate to show that stamp duty has been paid. This marking is done by an authorized government machine (This machine available at authorized Bank and post office). This stamp makes the document legally valid and acceptable for banks, courts, and government offices. It is an old and commonly used method, although digital methods are slowly replacing it.
Franking is usually needed for these documents:
- Property papers like sale deeds, gift deeds, and rent or lease agreements
- Home loan documents, because banks check whether stamp duty is paid before approving the loan
- Demat account documents, especially the Power of Attorney (PoA) that allows brokers to manage shares
- Business agreements like MoUs and shareholder agreements, to make them legally valid.
What is share certificate?
A share certificate is an official document, printed and signed, that proves you legally own the shares listed on it. All companies—whether small or big—must give shareholders a share certificate. It serves as proof of ownership in the company. When you buy shares, the company issues this certificate with its official seal. The document shows important details such as the company’s name and address, the shareholder’s name, the number of shares owned, and the price paid.
Companies must issue share certificates within 60 days of the shares allotment. There’s no specific place required to issue them, as long as the Board of Directors approves the issuance.
According to Section 3 of the Indian Stamp Act, every share certificate must be stamped, and the company pays stamp duty as per the rates in each state or Union Territory. Stamp duty applies even for dematerialized (digital) shares and is calculated on the issue price, not the nominal value of the shares.
Why Stamp Duty Matters for Share Certificates?
A share certificate without proper stamping is like a contract without a seal—legally weak and open to disputes.
When companies issue shares, they usually focus on valuation, funding, or investors. But stamp duty on share certificates is an important legal requirement that is often ignored. Missing this step can lead to penalties, legal issues, and future complications.
Stamp duty applies to both physical and demat shares in India and must be paid as per applicable laws. Understanding who collects it, how it is calculated, how to pay it, and how to keep records is essential.
Timeline to pay stamp Duty
According to the Indian Stamp Act, you must pay the stamp duty within 30 days from the date of the event (like signing a document or agreement).
Mode/Method of payment & stamping
E-Stamping / E-Stamp certificate: In many states, you can pay stamp duty for Demat shares online through portals like SHCIL e-stamp or NSDL.
Physical stamps / stick-on stamps / franking machines: Some states still require physical share certificates to be stamped using paper stamps (stick-on stamps) or franking machines through the stamp office.
Affixing / Cancelling / Certification: After the stamp or franking is applied to the document, it should be visible on the certificate, and the stamp is marked to prevent reuse.
Submission / Record keeping: Companies should keep the stamped certificate and proof of duty payment (challan/receipt) in their records for legal and audit requirements.
Online Stamp Duty payment module for issuance of shares
- Go to www.shcilestamp.com, register your company, and activate your account via email.
- Log in and fill in the Share Details Form with all required information. For Demat shares, include Depository Name, DP Name, Client ID, and DP ID.
- Upload all mandatory documents and click Submit. You’ll get a Reference Number.
- A government supervisor will check your entry and mark it as Authenticated.
- The Collector of Stamps (COS) will then generate a challan or reject the request. You’ll get an email notification.
- Pay the stamp duty online or at the SHCIL branch, then print the acknowledgement.
- Once payment is verified, the e-Stamp Certificate is issued. You can download and print it from your account.
Rate of stamp duty
The following table shows the stamp duty rates on issuing or transferring shares under the old rules and the new rules, according to Schedule I of the Stamp Duty Act, 1899.
| Particulars | Before 1st July 2020 | After 1st July 2020 |
| Issue of share certificate | Rates differed in each state | 0.005% for all states |
| Transfer of physical shares | 0.25% | 0.015% |
| Transfer of Demat shares | No stamp duty required (NIL) | 0.015% |
It’s important to know that any shares issued or transferred by the company before 1st July 2020 will follow the old stamp duty rates.
Note: Some states (like Delhi) have issued their own circulars applying a higher rate (e.g., 0.1%) to share issuances in both physical and demat form, which overrides the central uniform rate for companies registered in that state.
What is share franking?
Share Franking means putting a stamp on a share certificate to show that the company has paid the government stamp duty. This is done with a special machine which is provided by the government to the office of Sub Registrar’s or Stamp Collector’s office. The machine can stamp up to Rs. 999, and the company just needs to send a request letter to get the share certificates stamped.
What are the types of franking?
Here are the three types of Franking:
1. Manual Franking
Manual franking is done by hand using an official rubber stamp or seal to show that stamp duty has been paid. It requires physical handling of documents and is usually used when there are only a few documents to stamp. This method is suitable for small volumes of paperwork.
2. Machine Franking
Machine franking uses a special authorized machine to print a clear and uniform stamp directly on documents. This method is faster than manual stamping and is ideal for handling large numbers of documents. It ensures consistency, looks more professional, and reduces the risk of errors or misuse. Because the machine is secure and government-approved, it provides better control and reliability compared to hand stamping.
3. Digital Franking
Digital franking is an online way to pay stamp duty. You pay digitally and instantly get a secure e-stamp with a unique number (UIN). There is no need to visit any office or handle physical papers, making it fast, safe, and convenient.
How Franking/Stamp Duty/e-stamping documents look like
A franked document carries a red impression with:
The stamp duty amount
Date of payment
Unique reference number
Bank/agency details
This imprint is affixed either before or after document execution. It depends on the state’s specific regulations and procedural rules.
Difference Between Franking and Stamping
Here are some key differences between franking and stamping:
| Features | Franking | Stamping |
| Method of Application | It is done by the authorized Government franking machine. | It is done using adhesive stamps(sticker, label, Impression), e-stamping, or stamp paper. |
| Authorized by | For franking, the government approves banks, Post office and franking agents. | For stamping, two departments are responsible for collecting stamp duty: the revenue departments of various states and SHCIL. |
| Availability | Available only at authorized banks, Post office and agents. | Stamping can be done online via e-stamping or physically at approved vendors. |
| Convenience | For franking, it is required to visit an authorized franking center. | For stamping, if using adhesive stamps (sticker, label, Impression), you need to collect them in person. For e-stamping, there is no need to collect physically, as it can be paid online. |
Penalty on Late Payment of Stamp Duty on Share Certificates?
Stamp duty on share certificates must be paid within 30 days from the date the certificate is issued. If it is not paid on time, the authorities can charge a penalty of up to 10 times the stamp duty amount. Paying stamp duty on time helps avoid heavy fines and legal problems.
Let’s understand this with examples of documents where accurate stamp duty was not paid:
1. A mortgage deed should be stamped for ₹20,000, but only ₹15,000 was paid.
- Shortfall stamp duty: ₹5,000
When detected:
- Penalty (up to 10 times): ₹50,000
Total payable: ₹55,000
2. An unstamped agreement is submitted as evidence in court. The judge impounds the document and sends it to the Collector of Stamps.
Stamp duty required: ₹2,000
Penalty imposed (say 5 times, depending on discretion): ₹10,000
Total payable: ₹12,000
3. A share transfer deed requires stamp duty of ₹1,000, but the company forgot to frank or e-stamp it within time.
- Required stamp duty: ₹1,000
- Delay in stamping
Stamp Authority may levy:
- Penalty (10 times): ₹10,000
Total payable: ₹11,000
Note:
The maximum penalty can be 10 times the stamp duty, but the exact penalty is decided by the Stamp Authority based on delay and circumstances.
Without paying the duty and penalty, the document cannot be legally enforced.
Conclusion
In this article, we explored everything about stamp duty, franking and share certificates in a simple way. First, we learned what stamp duty is and why companies need to pay it. Then we looked at franking and stamping and how they are different. We also understood what a share certificate is, when stamp duty should be paid, and what happens if it’s not paid on time. Plus, we learned about the minimum and maximum stamp duty amounts.
By the end, it’s clear that stamping or franking share certificates is a must. If a company ignores it, it can bear big penalties. That’s why companies should issue properly stamped certificates as soon as shares are bought. And if the process seems tricky, it’s always a good idea to get professional help to avoid mistakes and fines.
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FAQs: Get answers to all your queries!
Question. Can we franking our documents online?
Answer. In most cases, franking cannot be done fully online because it requires a physical franking machine. Which machine available at the authorized bank, which prints the stamp directly on the document.
Question. What does franking mean in shares?
Answer. Franking is a stamp on a share certificate showing that the government’s stamp duty has been paid. It means a receipt on your shares that proves the required government tax is already paid.
click here: for deep knowledge about the Private limited Company registration!
Question. What are franking credits on shares?
Answer. It simply means, When you get a dividend, you don’t have to pay tax on the part already paid by the company. A franking credit reduces your personal tax liability. Example: Company earns ₹100 profit and pays ₹30 It gives ₹70 as a dividend to you. That ₹30 is your franking credit, which the shareholder can use to reduce their tax liability.
Question. What is Australian shares with franking credits?
Answer. In Australia, franking credits are the tax credits attached to dividends, showing the company has already paid tax on its profits. (In simple way: It means the tax credit shows the company has already paid tax on its profits. Simply put, the shareholder can use it to reduce their own tax on the dividend.)
Question. Which is the best shares with franking credits?
Answer. Here are some of the best shares with franking credits: Telstra (TLS) Common wealth Bank (CBA)
-BHP Group (BHP)
-Rio Tinto (RIO)
-Wesfarmers (WES) These are well-known Australian, reliable companies that pay dividends with franking credits.
Question. Is there any Indian company that falls into the category of franking credits?
Answer. No, Indian companies do not have “franking credits” like in Australia. Franking credits (or imputation credits) are part of the Australian tax system, where the company tax already paid can be passed to shareholders to reduce their personal tax. In India, dividends are taxed differently: Earlier, companies used to pay Dividend Distribution Tax (DDT), which was the company’s tax on dividends. Now (since April 1, 2020), dividends are taxable in the hands of shareholders, and there is no franking credit system in India. So, no Indian company provides franking credits like Australian shares.
Question. What is franking in shares?
Answer. Franking in shares means putting a special official stamp on a share certificate to show that the company has paid the government’s stamp duty. Without franking, the share certificate is not fully legal and may not be accepted in official matters.
Question. Why is it necessary to stamp and frank shares certificates?
Answer. A share certificate needs to be franked and stamped because it proves that the required government stamp duty has been paid, making the certificate legally valid. Without franking and stamping, the certificate may not be officially recognized, and the shareholder’s ownership could be disputed. It also prevents fraud by ensuring only authorized banks or authorities can issue valid certificates.
Question. What happens if shares certificates are not stamped and franked on time?
Answer. If share certificates are not stamped or franked on time, it can cause legal problems, fines, and disputes over ownership.
click here: for more information about stages of formation of Company!
Question. Can share certificates be stamped electronically?
Answer. Yes, share certificates can be stamped electronically using e-stamping. This is a digital way to pay stamp duty, and it works just like traditional stamping but is faster, safer, and more convenient.
Question. Are there any exemptions from stamp duty for shares certificates?
Answer. Yes, Some share certificates, like Demat shares, may not need stamp duty, depending on the rules in your state.
Question. What is the due date for stamping and franking of shares certificates?
Answer. The due date for stamping and franking a share certificate is within 30 days from the date the shares are issued to the shareholder.
Question. How to pay stamp duty?
Answer. You can pay stamp duty either physically via franking or online via e-stamping.
click here: for deep knowledge about the Post-incorporation compliance to Pvt. ltd./OPC company.
Question. What is the Stamp duty rates on shares certificates?
Answer. After the 2020 amendment, the stamp duty on share certificates depends on the type of shares and the transaction. When a company issues a new share certificate, it has to pay 0.005% of the issue price as stamp duty. This rate is the same across all states. shares are transferred in physical form, the stamp duty is 0.015% of the share value. Even for Demat shares,the stamp duty is 0.015% of the value. Earlier, Demat shares were sometimes exempt, but now they are also included under the uniform stamp duty rules.
Question. What is the process to issue share certificates with stamp duty?
Answer. Draft share certificate → pay government duty → choose stamping method (online or franking) → get the certificate stamped → issue to shareholder.
Question. What happens if I don't pay stamp duty on share certificates?
Answer. If you don’t pay stamp duty on a share certificate on time, you may have to pay up to 10 times the stamp duty as a fine. You could also face legal problems and disputes over ownership.
Question. Is stamp duty applicable on digital shares or only on physical ones?
Answer. Stamp duty must be paid on all shares, whether physical or digital (Demat).
Question. Can stamp duty be paid online for physical shares certificates?
Answer. Yes, in many states, stamp duty for physical share certificates can be paid online using e-stamping. After payment, the e-stamp certificate is attached to the physical share certificate to make it valid.
Question. Who is responsible for stamp duty payment the company or shareholders?
Answer. The company is responsible for paying the stamp duty whenever it issues share certificates, and the shareholders simply receive the stamped certificates.
Question. Which states have made e stamping mandatory?
Answer. Many major states and Union Territories in India—like Delhi, Karnataka, Gujarat, Maharashtra, Uttarakhand, Himachal Pradesh, and Assam—now mostly use e-stamping for high-value transactions. But the rules can differ depending on the state and type of document, so it’s best to check the local revenue department’s website.
Question. Can I use an e stamp certificate for any type of document?
Answer. Yes, e stamping can be used for almost all types of documents requiring stamp duty payment, including:
- Sale Deeds
- Lease/Rent Agreements
- Affidavits
- Power of Attorney
- Mortgage Deeds
- Partnership Deeds
Question. Can an e-stamp certificate be considered the official legal document?
Answer. An e-stamp certificate only proves that the stamp duty has been paid. You need to print the e-stamp certificate and attach it to the actual legal document (for example, a rental agreement or sale deed). Both the document and the e-stamp certificate must be kept together.
Question. Can stamp duty be refunded if the transaction is cancelled after payment?
Answer. If stamp duty is paid but the transaction is cancelled (for example, a property deal falls through), you can usually get a refund. The rules differ by state, a small part may be deducted, and it usually must be claimed within six months.
Question. When we need to frank documents?
Answer. When a legal document involves a financial transaction, it usually needs to be franked to be legally enforceable or accepted by a court.
Question. Why documents are franked? (not just for court use)
Answer. Franking is required to prove stamp duty payment, avoid penalties, and make a document legally valid.
Question. What are franking charges and who sets them?
Answer. Franking charges are fees levied by authorized franking agents or banks for paying stamp duty on documents like share certificates. The exact charges vary by state and are specified by the respective state’s stamp authority. For example, Karnataka may charge around 0.1% of the transaction value, while Maharashtra can charge up to 3%.
Question. How is franking different from e-stamping or digital stamping?
Answer. Franking is a manual, offline process that requires physical presence. E-stamping is a digital method where stamp duty is paid online, and a tamper-proof certificate is issued. E-stamping providers offer real-time document stamping, audit trails, and bulk processing, making it an enterprise-ready solution.
Question. Who pays stamp duty on share issue?
Answer. The company issuing the shares is generally responsible for paying the stamp duty on share certificates.
Question. Is stamp duty refundable?
Answer. Generally, stamp duty is non-refundable, except in certain cases allowed under the applicable Stamp Act rules.
Question. Is stamping required before or after execution?
Answer. Yes, stamping is required before or at the time of execution of the document.
Read more Article:
- Post-Incorporation Compliance: Private Limited/OPC Company.
- How to Register Private Limited Company in India.
- How to choose a Company Name: Meaning, Importance and Types.
- How to Create Brand Name: Meaning, Importance, Types, What is?
- Company Name vs Brand Name: Key Differences/Ultimate Guide
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