When is a Stamp paper needed?

Stamp papers has been widely used around the world to collect taxes on documents requiring stamping. such as leases, agreements, receipts, court documents and many others. This is an efficient way of collecting taxes and stamping documents withut the need to submit them to a separate govt. stamp office. 

The Indian Stamp Act, 1899 deals with stamping of agreements/documents in India. Stamping of agreements and documents is desirable as it ensures admissibility, legality and validity in court since such agreements can be registered under the Indian Registration Act, 1908, which in turn ensures its enforceability. There are certain agreements mentioned under section 17 of the Indian Registration Act, which are to be compulsorily registered and thus, cannot be made without stamp paper. Some of these are,

1. Sale deed, agreement to sell, gift deed, lease, and others (instruments pertaining to immovable property)
2. Instruments pertaining to movable property valued at or above INR 100.
3. Lease deed of an immovable property, where the lease exceeds 1 year.
4. Instruments that assign/transfer a decree or order of Court for a value exceeding INR 100 of immovable property.
5. Document of adoption executed other than through a will.

Documents that need to be made on stamp paper but need not be registered:

1. Power of attorney that is given, except power to sell property.
2. Lease agreement and Lease deed for less than 1 year.
3. Recording a past transaction.
4. Development agreement like, Agreement of sale given by a landowner to a developer.

The Contract Act does not make stamping of contracts compulsory, nor does it suppose an unstamped agreement/contract invalid and unenforceable. So, agreements do not require mandatory stamping for them to constitute as legal and valid. Even though are not stamped, they will still be enforceable as against the parties who have signed the same. The only discrepancy of an unstamped agreement is producing an unstamped agreement in court as evidence. Section 35 of the Stamp Act makes a document which does not bear a requisite stamp duty as inadmissible in a court of law, though this provision has certain exceptions.

For small values, e-stamping or paper stamp is preferred. Franking is preferred when stamp duty in lacs is to be paid. One gets proof of payment in the form of challan copy.