Circular No. 358

What it does

Holds that the credit for stamp duty under section 18A of the Gift-tax Act does not depend on what the instrument is called. Section 18A, as substituted by the Finance Act, 1982 with effect from 1st April 1983, gives the assessee a deduction from gift-tax equal to the stamp duty paid on an instrument of gift of property, or one-half of the gift-tax otherwise payable, whichever is less. Where property passes by a registered instrument styled a family settlement or something else but found to be a gift assessable under the Act, the Board decides, in consultation with the Ministry of Law, that the stamp duty paid on it is deductible to the extent it is attributable to the gift charged. But where gift-tax is attracted because the declared consideration falls short of fair market value, no deduction is available, since the tax is charged on the excess over the stated consideration and no stamp duty has been paid on that excess.

Why it was issued

Instances came to the Board's notice of property being transferred by registered instruments not styled as gifts, and the question arose whether stamp duty paid on them could be credited when the transfer was assessed to gift-tax.

Who it reaches

Donors assessed to gift-tax on family settlements and similarly styled deeds
Assessees who paid State stamp duty on such instruments
Gift-tax Officers computing the section 18A credit
Parties to transfers for a consideration below fair market value, who get nothing

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.18A	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 18A l CREDIT FOR STAMP DUTY PAID ON GIFT DEED
1462. Whether deduction of stamp duty under the section admissible on instrument not designated as instrument of gift
1. Section 18A as substituted by the Finance Act, 1982 with effect from April 1, 1983 is as under :
"Where any stamp duty has been paid under any law relating to stamp duty in force in any State on an instrument of gift of property, the assessee shall be entitled to a deduction from the gift-tax payable by him of an amount equal to the stamp duty so paid or one-half of the gift-tax payable, before making the deduction under this section, whichever is less."
2. Instances have come to the notice of the Board where property is transferred by way of a registered instrument which is not designated as an instrument of gift but as a "family settlement" or by some other name or title. Such transfers may, however, be found to be in the nature of gifts assessable under the Gift-tax Act. A question has arisen as to whether when assessment is made in such cases to gift-tax, stamp duty paid would be deductible under section 18A.
3. The Board have decided in consultation with the Ministry of Law that irrespective of the designation or title of the instrument leading to gift of property, stamp duty paid thereon or any part thereof, as the case may be, would be allowable as deduction to the extent such stamp duty or part thereof is attributable to the gift charged to gift-tax.
4. In respect of certain transactions gift-tax is attracted on account of the declared consideration being less than the fair market value of the property transferred. In such cases, however, the stamp duty paid would not be deductible under section 18A since gift-tax is charged on the value over and above the stated consideration and on such excess value no stamp duty would have been paid.
Circular : No. 358 [F. No. 340/1/81-GT], dated 30-4-1983.

What to watch

This is a Gift-tax Act circular; section 18A here is of the Gift-tax Act, 1958, not the Income-tax Act.
The credit is capped at one-half of the gift-tax otherwise payable, so a large duty does not wipe out the tax.
Deemed gifts arising from inadequate consideration are expressly outside the credit.
Section 18A came in with effect from 1st April 1983, and gift-tax itself was later withdrawn, so the credit belongs to the years the Act ran.

Where you meet it

In a gift-tax assessment of a family settlement or similar deed, and in a claim for stamp duty credit in the computation of gift-tax payable.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

G.S.R. 455(E) — 1st June appointed under section 18 28 May 2010
Circular No. 492 — 1207. Waiver/reduction of interest to be allowed under section 215/217- Rule 40 (1) of the Income-tax Rules, 1962 - How 21 July 1987
Circular No. 127 — 628-632. Agreement for avoidance of double taxation with Pakistan - Whether operative for assessment year 1972-73 and su 10 January 1974

← Circular No. 359 · Circular No. 354 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is