INDIAN STAMP ACT, 1899

1. Definition of Instrument

Instrument refers to any document through which rights or liabilities are created, transferred, limited, extended, extinguished, or
recorded. This definition is broad and encompasses various types of legal documents, but it does not include regular
communications such as ordinary letters or accounts.

Examples of Instruments:

 Conveyances  Promissory notes

 Leases  Wills
 Mortgages

within India, received in India, and not

previously executed.
2. Instruments Chargeable with Duty [SECTION-3]

Stamps Duties are taxes placed on certain types of Section 3:- Where Stamp Duty Is Payable
documents to make them legally effective. 1) Instrument executed in India and property
situated outside India.
The following instruments are chargeable with a duty 2) Instrument executed outside India and
as specified in Schedule I: property situated in India.
a. Instruments Executed in India (from July 1, 1899) 3) Bill of exchange and promissory note
 Applies to all documents listed in Schedule I made and executed in India except payable on
that are created within India and have not demand
However Following Instrument Need Not to Be
been previously executed. Pay Stamp Duty
b. Foreign-Executed Instruments Related to India ❖ Instrument executed by or on behalf of
 Applies to: government.
 Bills of exchange (not on demand) or ❖ Sale, lease transfer of any ship or vassal.
promissory notes made outside India ❖ Bill of exchange and promissory note executed
but accepted, paid, or negotiated and acted outside India.
within India. ❖ Instrumented executed by or behalf of person
 Any other instruments made outside or in favour of person in connection
India related to properties or activities with SEZ.
c. Exemptions from Duty
 Government-related documents where the government would otherwise be liable for the duty.
 Documents dealing with the sale, transfer, or mortgage of ships or parts of ships.
 Documents executed in relation to the purposes of Special Economic Zones (SEZ).

BOND

1. What is a bond?
o A bond is an instrument whereby a person obliges himself to pay money to another on condition that
the obligation shall be void if a specified act is performed, or is not performed, as the case may be.
2. What are the types of bonds?
o Any instrument attested by a witness not payable to order or bearer, whereby a person obliges
himself to pay money to another.
o Any instrument so attested, whereby a person obliges himself to deliver grain or other agricultural
produce to another.
3. What is the key requirement for a document to be a bond?
o No document can be a bond unless it is one which, by itself, creates the obligation to pay the money.
Section 4 -SINGLE TRANSACTION EFFECTED BY SEVERAL INSTRUMENTS
1) For effecting a single transaction, many agreements may be required to be executed.
2) This creates a hardship on the parties to pay stamp duty on every single instrument.
3) But the Indian stamp Act provides a relief from the above mentioned hardship.
4) Section 4 of the Indian Stamp Act, states that, if for effecting a single transaction many
instruments are executed, the stamp duty will be paid only on the principal instrument & the
remaining instruments will be chargeable with duty of Rs. 1.
5) The principal instrument will be the instrument on which highest stamp duty is payable.
Example
A person, X gifted all his property to his brother Y by a deed and in consideration of that the other
brother promised to pay Rs 1 lac per month to X and also mortgaged one of the gifted property by a
deed, in favor of brother X as a guarantee for performance of the promise, the court decided that both
the instruments relate to one transaction only.

SECTION 4 NOT APPLICABLE

(i) A lease deed is made and after some time another lease deed is made to modify the previos lease
deed, both the leases are several matters and not covered under section 4.
(ii) A person purchases the land makes the half payment and for the remaining half payment, mortgages
the same land to the seller. (separate matters not covered in section 4)