Stamp duty above Rs 500 may be dematerialised

State Govts expected to amend laws

The Centre is expected to amend the Stamp Act to allow all high-value transactions to be registered through the depository mode.

In the aftermath of the stamp paper scam, the Centre is exploring the option of doing away with all stamp papers of higher denominations.

According to senior government officials, for high-value transactions in the corporate sector the participants will instead pay the requisite fees through a depository to the state or the central government.

The Centre has already held preliminary talks with some state governments who have favoured the suggestion.

While no figure has been firmed up, it is expected that there may be no paper with a value of more than Rs 500. Even these will have enhanced security features.

However, the government will ensure that the poorer sections of the society will not have to switch over to the demat mode for their transactions.

The officials, however, acknowledged that the process of moving over to dematerialisation of stamp paper regime will take far longer than the six to eight weeks promised by finance minister Jaswant Singh last week.

The amendment to the Central Stamp Act by the department of revenue in the finance ministry will itself take some time. The amendment is necessary to give a legal status to payment of stamp duties through the new method.

Based on the amendments, the state governments are expected to either change their rules or amend their respective stamp acts.

The officials said the changes in the Act at the Central level would be enabling provisions which would be applicable for insurance and banking sectors.

The format will be patterned on the share depository mode. Corporates and high net worth individuals will route their stamp duty payments through a demat account.

The success of the depository mode in the capital market and its extension for replacement of tax challans have made the option an attractive one for the government.

Sources said the alternative of asking the companies and others to approach designated bank branches and use a demand draft will be cumbersome.

The Centre is worried that a repeat of the current stamp paper scam is possible unless the entire method of working of the stamp paper machinery is overhauled.

The officials also said it makes no sense to have currency notes of a maximum value of Rs 1,000 while such papers range up to Rs 25,000 in value.