You could be a stamp duty defaulter too

Bombay Stamp Act stipulates that the duty is applicable not just on stars' endorsement contracts but even on general employment contracts

Bombay Stamp Act stipulates that the duty is applicable not just on stars' u00a0endorsement contracts but even on general employment contracts

IF you are employed with your company on a contract basis, you could well be an unwitting stamp duty defaulter according to the conditions stipulated under the Bombay Stamp Act of 1958.

The Act states that parties signing all kinds of work, employment and commercial contracts have to pay stamp duty to the collector.
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In case of work contracts, the stamp duty is payable by every employer and employee.

The good news, however, is that while celebrities like Sachin Tendulkar and Kareena Kapoor allegedly owe a few lakh rupees to the stamp duty office as reported by MiD DAY yesterday, your dues, if any, would run into a few hundreds.

Nitin Gosavi, Additional Controller of Stamps, Mumbai, told MiD DAY that the Stamp Act lists out 63 documents which attract stamp duty under its Schedule A.

"Work contracts attract stamp duty and, if the document is not stamped, it does not have legal validity and cannot be treated as evidence in a court.

Usually, work contracts up to Rs 10 lakh attract a stamp duty of Rs 100 and an additional sum of Rs 100 has to be paid for every lakh thereon.

A penalty of an interest of 2 per cent on this amount or 200 per cent of the amount (whichever is higher) is levied in case the person defaults on the duty."

Gosavi said that even though the rule is applicable to employee-employer contracts, most companies and workers are unaware of this.

Usually, when a dispute arises and either of the parties decides to take the matter to court, the court impounds the document and sends it to the stamp office for stamp duty valuation.
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Only when the stamp duty and penalty is paid is the document accepted as evidence.

Gosavi said that it is difficult for the stamp office to keep a check on all agreements and contracts.

So, it has sent a circular to all government organisations, including the BMC and MMRDA, which sign work contracts to follow the law and pay stamp duty before signing the same.

When MiD DAY spoke to human resource personnel in some companies, some said they weren't aware of the rule while others said they do not employ people on contract basis.

Ameya Joshi, senior manager, Leadership Learning and Change (HR) with Mudra Communications Private Limited, said, "Mudra doesn't encourage the practice of hiring consultants / retainers."

Experts say

"Any paper signed by two parties becomes a contract and it has to be stamped. A minimum of Rs 100 is to be levied on such a paper, which would also include the appointment letter of an employee hired on contractual basis."
Vimal Punamiya,
Chartered Accountant

"Stamp duty is levied not on transaction, but on the instrument or document in writing."
Sanjay Buch,
Partner, M/s Crawford Bailey u00a0& Co (An advocates and u00a0solicitors firm)

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