In Hurry..

A photographer for a national magazine was assigned to take pictures of a great forest fire. He was advised that a small plane would be waiting to fly him over the fire.

The photographer arrived at the airstrip just an hour before sundown. Sure enough, a small Cessna airplane was waiting.

He jumped in with his equipment and shouted, "Let's go!" The tense man sitting in the pilot's seat swung the plane into the wind and soon they were in the air, though flying erratically.

"Fly over the north side of the fire," said the photographer, "and make several low-level passes."

"Why?" asked the nervous pilot.

"Because I'm going to take pictures!" yelled the photographer. "I'm a photographer, and photographers take pictures."

The pilot replied, "You mean you're not the flight instructor?"

Understanding Indian Stamp Act 1899

Introduction:

There are some Acts which are difficult to understand and follow correctly. In my view The Indian Stamp Act, 1899 and Registration Act and Transfer of property Act, are those Acts which are inter related and application of these acts is required almost every day. Be it an affidavit, agreement or execution of sale deed, receipt, family settlement, invariably one has to refer to and comply with the provisions the above Acts. In this article, attempt is made to highlight the provisions Stamp Act in a brief manner.

Scheme of Act:

The Indian Stamp Act, 1899 is a Central legislation and deals with all aspects of stamps and stamp duties. It applies to whole of India except the State of Jammu & Kashmir. The Act through Schedule-1 lays down the rate of stamp duty payable on different instruments.

The instruments given in the Schedule-1 can be classified into two categories. First category of instruments consisting of bills of exchange, promissory notes, stamp duty for transfer of shares, debentures, bills of lading, proxies, letters of credit and receipts.

Second category of instruments consist of instruments such as agreements, affidavits, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney, security bond etc..

Vide entry 91 of List 1 central government is empowered to levy stamp duty in respect of first category of instruments and rates prescribed by Central Government will prevail over the rates prescribed by the state Government

Vide Entry 44 of List III and Entry 63 of List II, the State Governments have power to enact and levy stamp duty and prescribe the rates for all other instruments not referred above.

In the case of Second category of instruments, the rates prescribed by individual States will prevail in those States. However for these instruments, the rates prescribed in Scheudle-1 will be applicable only for union territories. If there is any conflict between State law and Union law, the Union law prevails as per Article 254 of Constitution.

It is clear from the scheme of legislation that fields for levy of stamp duty are central and state are demarcated so as to ensure that revenues collected through stamp duty are shared as per provisions of the Act.

Instruments are chargeable with stamp duty:

As per Section 2(14) of the Act, Instrument includes every document by which any right or liability is, or purported to be created, transferred, limited, extended, extinguished or recorded. Section 3 says every instrument mentioned in Schedule I to Indian Stamp Act is chargeable to duty as prescribed in the schedule. Thus, if an instrument is not listed in the schedule, no stamp duty is payable.

The list includes all usual instruments like affidavit, agreement, lease, memorandum and articles of company, bill of exchange, bond, mortgage, conveyance, receipt, debenture, share, insurance policy, partnership deed, proxy, shares etc. Instruments chargeable with duty but executed out of India, have to be stamped within 3 months after they have been received in India.

Stamp Duty in case of several documents in one instrument:

Some times several instruments are executed for one transaction. In case of sale, mortgage or settlement several instruments are executed for one transaction, only nominal value is collected on other instruments other than the principal instrument. If one instrument relates to several distinct matters, stamp duty payable is aggregate amount of stamp duties payable on separate instruments. If one instrument covering only one matter can come under more than one description given in Schedule to Stamp Act, in such case, highest rate specified among the different heads will prevail.

Exemptions from stamp duty:

Instruments executed by, on behalf Government need not bear any stamps. Similarly if the Schedule exempts any particular instrument subject to certain conditions those are also exempt or concessional duty is payable. Section 9 of the Indian Stamp Act gives power to State Govt to remit the stamp duty in certain cases, by issuing a notification to that effect. If the state government is following Schedule I of the Indian stamp Act, this exemption will be applicable. For e.g. By exercising power u/s 9(a) of the Indian Stamp Act 1899, State Government of Orissa has issued a notification to provide exemption from stamp duty in the case of orders sanctioned by the Hon’ble High courts u/s 394 of the Companies Act 1956. But this exemption is subject to fulfilment of conditions specified there in.

Types of Stamps:

Stamps are of two types namely adhesive stamps and printed/embossed stamps. Again adhesive stamps are printed with words “Notarial” or Share. The former are used for notarial acts and the latter are used for transfer shares/debentures. Embossed stamps are non-judicial stamps which are used for executing documents. However for court proceedings, court fee stamps are used as per the provisions of court fee Act and not under Stamp Act.

Manner of payment of stamp duty:

Stamp duty is paid either by purchasing and affixing adhesive stamps or by remitting money for franking on the instruments. Adhesive stamps are used for execution of promissory notes, bill of exchange, and transfer of shares or debentures. Adhesive stamps are printed with words “Notaries” or Share. The former are used for notarial acts and the latter are used for transfer shares/debentures. Non judicial stamps are printed with Government emblem and are used for execution of agreements. Central government only has the authority to print the stamp papers and supplies to various states. Stamps of various denominations are sold in treasuries and also authorized stamp vendors who usually charge premium some times in case of scarcity. Adhesive stamps are to be cancelled so that the same can not be used again. Cancellation can be done by writing his name /initial or by drawing lines across the stamps. If cancellation is not done that instrument will be deemed to be unstamped

Liability to pay duty:

In the absence of any agreement to the contrary, in respect of promissory notes, bonds, debentures, mortgage deeds, transfer of shares, by the person drawing or making or executing the instrument.

Effect of under stamped/unstamped documents:

As per the Evidence act, any instrument presented as evidence must be charged with requisite stamps. If an instrument is not stamped or under paid, it will not be accepted as evidence in a court of law. Collector or any officer before whom it is presented can impound such under stamped/unstamped instruments and levy fine. The person executing the documents can present the document to the collector within one year from the date of execution for adjudication and pay the deficit stamp duty and make the document all right.

Conclusion:

Unless proper stamp duty is paid, documents executed may expose the Executants to huge penalty and also face the risk of court not accepting it as evidence. It is therefore important to check the relevant article in Schedule-1 or 1A of the states to ensure that proper stamp duty is paid at time of execution of instrument.

Employee can claim deduction even of employer's contribution to NPS

The New Pension Scheme (NPS) was introduced by the Union Government in 2003. According to the new scheme, employees appointed on or after January 1, 1994 will contribute 10 per cent of their Pay and Dearness Allowance to the Pension Fund Regulatory and Development Authority under the Ministry of Finance. An equal amount will be contributed by the Centre. The scheme is mandatory for Government employees, but optional for other citizens of India. NPS merely declared that tax benefits would be applicable as per the Income Tax Act 1961 as amended from time to time. 

Limits on Deduction

Section 80CCE provides that the aggregate amount of deduction under Section 80CCC and 80CCD shall not exceed Rs 1 lakh. The Finance Act, 2011 provides that contribution made by the Central Government or any other employer to NPS shall be excluded while computing the limit of Rs 1,00,000. The contribution by the employee to the NPS will be subject to the limit of Rs 1,00,000.

At the same time, deduction in respect of contributions by the Central Government or any other employer to NPS available under Section 80CCD (2) will not be subject to the limit specified in Section 80CCE. This provides a leeway for employees to seek a restructuring of the pay. Employers may be willing to include the contribution to the NPS in the pay package and claim 10 per cent of the salary as deduction. Depending on the pay scales, such restructuring may offer a benefit to both the employer and the employee.

The Employees Provident Fund Organisation has within its fold 4.72 crore subscribers. They get interest income of 9.5 per cent on PF deposits for 2010-11. There is also a move to increase the rate of interest .

The New Section 36(1)

The Finance Act, 2011 has inserted a new Section 36 (1)(iva) with effect from assessment year 2012-13 to provide that an assessee will get a deduction in respect of contribution towards a pension scheme referred in Section 80CCD of the Act on account of an employee up to 10 per cent of the salary of the employee in the previous year. For this purpose, ‘salary' includes DA, if the terms of ‘employment' so provide, but excludes all other allowances and perquisites.

Currently, contribution made by an employer towards a recognised provident fund, an approved superannuation fund or an approved gratuity fund is allowable as a deduction from business income under Section 36, subject to certain limits.

However contribution made by an employer to the NPS is not allowed as a deduction. The newly inserted clause provides that any sum paid by the assessee as an employer by way of contribution towards the pension scheme on account of an employee to the extent it does not exceed 10 per cent of the salary of the employee in the previous year, shall be allowed as deduction in computing the income under the head ‘Profits and gains of business or profession'.

No doubt, such deduction would have been available under Section 37. The matter, however, is placed beyond doubt by the new Section. It should, however, be noted that deduction would be available only upon actual payment. The term ‘employee' will include all employees including Director-employees. The limit of 10 per cent will apply to each employee individually. The Finance Act has also amended Section 40A (9) for this purpose.

Waiver for PF interest

In this context, the decision of the Income-Tax Department to grant an exemption from tax on the interest income on PF deposits will come as double bonanza for the subscribers.

Deduction for contribution to the NPS in the hands of the employer and the exclusion of such contributions in the hands of the employees in computing the exemption under Section 80C will mean a morale booster for the employer and the employee.