Stamp duty is a form of indirect tax. Traditionally, the rule was to attach or put impression of stamp upon a document to indicate that stamp duty has been paid before the document became legally effective. Nowadays, a physical stamp is not required on the documents in case of more modern versions of tax. It is levied on instruments of transfer and conveyance at different rates, such as bills of exchange, promissory notes, insurance policies, contracts effecting transfer of shares, debentures and conveyances for the transfer of immovable property. The rates of stamp duty prescribed under the Indian Stamp Act, 1899 in respect of bill of exchange, cheques, transfer of shares etc. prevail all over India. However, other stamp duty rates prescribed under the Indian Stamp Act, such as stamp duty on agreements, affidavit, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney, security bond etc. are valid only for Union territories. The rates of stamp duty in the States are prescribed by individual States.
