Background and Rationale

Indian Stamp Act, 1899, governs the levy of stamp duty on various instruments executed in India. Schedule 1-A, Entry 6 relates to instruments concerning loans and securities. The Government of Punjab observed that borrowers often refinance or transfer their existing loans to other banks or financial institutions but faced the burden of paying stamp duty again, despite no substantial change in the underlying security. This amendment intends to ease financial costs for borrowers and promote ease of doing business by exempting duplicate stamp duty payments during loan switches under certain conditions.

Detailed Comparison of Provisions

Amendments and Their Implementation

• In Schedule 1-A, Entry 6, the ending phrase was corrected from “from the date of such instrument.” to “from the date of such instrument:”.
• A new proviso is inserted stating that if a debtor shifts a loan to another bank or financial institution, and:
  • The secured assets (movable or immovable) remain the same, and
  • The loan amount is the same or less than before,
    then no new stamp duty will be payable.
• If the loan amount increases, stamp duty will be levied only on the additional amount.
• This change is effective immediately from the date of publication, i.e., April 21, 2025.

Implications and Future Prospects

The amendment is borrower-friendly and aligns with the broader policy initiatives encouraging ease of credit. It is expected to result in:

• Increased refinancing and loan restructuring activities in Punjab.
• Improved borrower mobility among banks and NBFCs.

Banks and financial institutions operating in Punjab must update their operational guidelines immediately to account for this relaxation. Borrowers planning to refinance can benefit from this without additional stamp cost, provided they ensure compliance with the conditions stated.

Conclusion

The Indian Stamp (Punjab Amendment) Act, 2025, marks a progressive step by removing redundant stamp duty obligations for borrowers switching loans without material change in collateral or loan quantum. This will simplify credit access and lower financial burdens, fostering a more borrower-friendly lending environment in Punjab.