A Note on Franking of Shares
A company or an organization can issue shares to indicate unit of ownership and issue share certificates indicating the names of the shareholders and the number of shares. The shares must be issued within 60 days of allotting the shares. The share certificates issued is similar to all companies, be it a public or a private company.
The share certificates must bear the essential stamp duty as per section 3 and 10 of The Indian Stamp Act, 1899. Stamp duty must be paid within 30 days of the issuance of the share certificates. The stamp duty should be borne as per the State/Union Territory stamp duty rates. They vary from state to state and UTs. The stamp duty is on the issue price and not on the value of security of the shares. Also stamp duty must be paid even if the shares are in dematerialized form.
The process of embossing a stamp on the share certificate indicating the value of the stamp duty paid is called Franking shares. There are various methods to pay stamp duty to the government.
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