When shares of a private limited company change hands in physical form, the instrument of transfer is Form SH-4, and it must be duly stamped before the company can register the transfer. Which statute imposes the duty, at what rate, on what value and payable by whom are questions with unusually clean answers, plus one important expiry date. Since 1 July 2020 the duty has been a uniform 0.015% of the consideration, levied under central law, and effective 30 June 2026 the physical route itself has closed for all private companies other than small companies.
Central Law Governs, Even for a Maharashtra Company
A common instinct for a company registered in Maharashtra is to reach for the Maharashtra Stamp Act, 1958. That is the wrong statute. Rates of stamp duty on the transfer of shares are reserved to Parliament by Entry 91 of the Union List in the Seventh Schedule of the Constitution, alongside instruments such as bills of exchange, promissory notes, debentures, proxies and receipts. The governing provision is Article 62 of Schedule I to the Indian Stamp Act, 1899, and Section 2(2) of that Act makes the allocation explicit:
"In relation to stamp-duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts…the Government means the Central Government."
The Maharashtra Stamp Act applies to instruments of a local or immovable-property character, and contains its own savings language: "nothing in this Act shall apply to rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts." The Maharashtra amendments of 2021 and 2022 revised property-related schedules and left share transfers untouched. The state government has no power to set a different rate for share transfers within its borders, and courts have consistently upheld the Central Government's exclusive authority over the rate and method of collection.
The Rate: 0.015% Since 1 July 2020
The Finance Act, 2019 overhauled the stamp duty regime for securities, amending Article 62. The amendments were notified on 10 December 2019 for commencement on 9 January 2020, then deferred by a Ministry of Finance notification of 30 March 2020 to 1 July 2020. From that date, the rate for transfer of securities (other than debentures) on a delivery basis, which covers physical share transfers on Form SH-4, is 0.015% of the consideration.
This replaced the earlier rate of 0.25%, expressed as "25 paise for every Rs. 100 or part thereof of the value of the share", a reduction of more than nine-tenths. The new rate applies uniformly across all Indian states; no state deviation is permitted, and there has been no change to the rate since 1 July 2020. Documents or checklists still citing 0.25% are outdated.
Duty Is Computed on the Consideration Stated in the Deed
For a physical transfer, the valuation base is the consideration stated in the Form SH-4 itself, not the face value of the shares and not a separately appraised market value. Market-linked valuation belongs to the demat world, where transfers pass through depositories and exchanges; for a physical instrument, the deed states the consideration and the duty follows from that stated amount. Section 24 of the Indian Stamp Act adds one wrinkle: where property is transferred partly in consideration of the release of a debt, duty is payable on the total of the consideration plus the debt released. For a straightforward sale, duty falls on the consideration alone.
The arithmetic is trivial. On a consideration of ₹10,00,000, stamp duty at 0.015% is ₹150.
Two practical notes attach. First, state the consideration accurately: if it is disputed later, the stamp duty assessment may be reopened by the authority. Second, gifts: the FAQs issued by the Department of Economic Affairs, Ministry of Finance, clarify that no stamp duty is charged on an off-market transfer of securities without consideration, such as a gift. Some stamp authorities and companies nonetheless take a conservative view and expect nominal stamping of a nil-consideration SH-4, so written confirmation from the stamp authority or the company is prudent before relying on the exemption.
Who Pays, When and How
On a physical share transfer, the transferor (seller) is liable to pay the stamp duty. This is the post-1 July 2020 allocation and it differs from demat transfers, where the buyer bears the duty. Share purchase documentation should say expressly that the seller will bear and pay the duty on the SH-4, to avoid later disputes.
Timing is statutory. Under Section 17 of the Indian Stamp Act, duty must be paid before or at the time the transfer deed is executed. And under Section 56 of the Companies Act, 2013, a company shall not register a transfer unless the instrument is duly stamped, dated and executed by or on behalf of the transferor and the transferee. An unstamped or under-stamped SH-4 is simply not registrable.
As to mode, adhesive stamps are no longer the standard for share transfers and may be rejected by registrars. In Maharashtra, payment is made electronically through the Government Receipt Accounting System (GRAS-Mahakosh) or by ESBTR franking. The e-stamp receipt or franking certificate should be preserved and its value and mode recorded in the "value of stamp affixed" section of the SH-4.
Form SH-4 Mechanics
Form SH-4 is prescribed under Rule 11(1) of the Companies (Share Capital and Debentures) Rules, 2014, made under Section 56 of the Companies Act, 2013. Its mandatory content includes:
- date of execution, and the company's CIN and full name;
- description of the securities (class, nominal value, called-up and paid-up amounts);
- number of shares, the consideration in figures and words, and distinctive and certificate numbers;
- transferor and transferee details, including folio numbers, addresses, occupations, PAN and signatures;
- the value of the stamp affixed, with the mode of stamping; and
- enclosures: the original share certificate (or letter of allotment where no certificate exists) and the transferee's PAN.
The form requires the signature, name and address of an independent witness, someone who is not a party to the transaction, with legible details. Once executed and stamped, the SH-4 must be lodged with the company within 60 days of execution under Section 56(4); late lodgment risks refusal of registration absent exceptional circumstances. After board approval of the transfer, the company must issue a new share certificate to the transferee within one month (Section 56(4)(c)), and no further stamp duty is charged on the new certificate.
The Physical Route Has Closed for Most Private Companies: Rule 9B
The most consequential recent development is not about rates at all. Rule 9B of the Companies (Share Capital and Debentures) Rules, 2014, introduced by amendment, mandates dematerialisation for private limited companies other than small companies: after the deadline, such companies cannot transfer shares in physical form, and all transfers must be routed through the depository system (NSDL or CDSL). The deadline, originally 30 September 2024, was extended to 30 June 2026 by MCA Notification G.S.R. 125(E) dated 12 February 2026.
That date has now passed. Effective 30 June 2026, Form SH-4 physical transfers are no longer valid for non-small private companies; the SH-4 route survives only for companies qualifying as small companies under the Companies Act. Before attempting a physical transfer, confirming the company's classification is therefore the first step, and depository-side procedures for the demat route may involve additional compliance steps that are still settling.
What the Courts Add
Litigation on the rate itself is scarce, because Article 62 is explicit. The case law operates at the margins. In Hindustan Lever v. State of Maharashtra, the Supreme Court dealt with court-approved merger schemes, where duty is levied by reference to the share exchange ratio rather than by separately valuing assets and liabilities; that is a scheme-specific rule with no application to an ordinary SH-4 transfer, where the deed states the consideration. And in Suhas Damodar Sathe v. State of Maharashtra, Writ Petition No. 8030 of 2017, decided 9 May 2025 (2025:BHC-AS:21275), the Bombay High Court reaffirmed that the substance of a transaction, not its form or label, determines chargeability, a principle that leaves little interpretive room for share transfers precisely because the SH-4 itself specifies the consideration.
Practical Takeaways
- Cite Article 62 of the Indian Stamp Act, 1899 as the governing provision in transfer documentation, not the Maharashtra Stamp Act.
- Confirm first that the company qualifies as a small company; effective 30 June 2026, other private companies must dematerialise and transfer through NSDL/CDSL rather than by SH-4.
- Compute duty at 0.015% of the consideration stated in the SH-4 (₹150 on ₹10 lakh) and state that consideration accurately.
- The seller pays, before or at execution, by e-stamp through GRAS-Mahakosh or ESBTR franking; keep the receipt and record its details on the form. Do not use adhesive stamps.
- Allocate the duty expressly to the transferor in the share purchase agreement.
- Lodge the stamped SH-4 at the company's registered office within 60 days of execution, with the original share certificate, the transferee's PAN and any board resolution where the transferee is a body corporate; expect the new certificate within one month of board approval.
- For gifts, the Department of Economic Affairs FAQs indicate nil duty where there is no consideration, but obtain written confirmation before executing a nil-consideration transfer.
Key Authorities
- Indian Stamp Act, 1899 — Article 62 of Schedule I (transfer of shares) and Section 2(2) (Central Government as the levying government). Source
- Finance Act, 2019 amendments to the Indian Stamp Act; Ministry of Finance notifications dated 10 December 2019 and 30 March 2020 — 0.015% rate effective 1 July 2020.
- Companies Act, 2013, Section 56; Companies (Share Capital and Debentures) Rules, 2014, Rule 11 — Form SH-4, stamping precondition to registration, 60-day lodgment. Form SH-4
- Rule 9B, Companies (Share Capital and Debentures) Rules, 2014; MCA Notification G.S.R. 125(E) dated 12 February 2026 — mandatory dematerialisation for non-small private companies, deadline 30 June 2026.
- Department of Economic Affairs, Ministry of Finance, FAQs on the amended Stamp Act — nil duty on off-market transfers without consideration (gifts).
- Hindustan Lever v. State of Maharashtra (Supreme Court) — in merger schemes, duty is levied by reference to the share exchange ratio; inapplicable to ordinary transfer deeds.
- Suhas Damodar Sathe v. State of Maharashtra, Writ Petition No. 8030 of 2017, Bombay High Court, 9 May 2025 (2025:BHC-AS:21275) — substance of the transaction determines chargeability. Source
- Maharashtra Stamp Act, 1958 — savings for Union List instruments, including transfer of shares. Source
This analysis reflects the law as at July 2026. It is published for general information and does not constitute legal advice.