Section 23A explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 23A of the Indian Stamp Act, 1899 deals with the paper that accompanies a loan secured on marketable securities such as shares. When a marketable security is deposited as security for a loan or debt, and an instrument is given on that occasion, the instrument is charged as an agreement under Article 5(c) of Schedule I. The same applies to an instrument that makes a security transfer redeemable, and to a release or discharge of such an instrument.
An instrument (other than a promissory note or bill of exchange) that is given on the deposit of a marketable security as security for a loan or debt, or that makes redeemable or qualifies a duly stamped transfer of a marketable security intended as security, is chargeable as an agreement under Article No. 5(c) of Schedule I. A release or discharge of such an instrument is chargeable with the like duty. Duty on most such papers is fixed by the State where they are executed.
How to read this article
This article is based on the consolidated text of the Act consulted (latest amendment shown: Act 13 of 2021); later amendments should be checked. It explains the central Act only. Stamp duty on most instruments is fixed by the law and schedule of the State where the instrument is executed, so the State must be checked for the duty on an agreement; the central Schedule's figures are quoted below only as the central Schedule prints them. If you are financing against shares or other securities, our loan documentation support can help you list the papers the arrangement creates.
The section was inserted by Act 15 of 1904, section 3, as the footnote shows, and the reference to "Article No. 5 (c)" was substituted by Act 1 of 1912, section 3, for "Article No. 5(b)". Both are quoted from the footnotes.
Section 23A(1): the two kinds of instrument
Sub-section (1) begins "Where an instrument (not being a promissory note or bill of exchange)" and then describes two situations.
Clause (a): given on the deposit of a marketable security
The instrument "is given upon the occasion of the deposit of any marketable security by way of security for money advanced or to be advanced by way of loan, or for an existing or future debt".
Elements to note:
- Marketable security. Section 2(16A) defines it as a security capable of being traded in any stock exchange in India. See our article on the securities definitions.
- Deposit by way of security. The security is deposited to secure a loan advanced or to be advanced, or an existing or future debt.
- Given on the occasion. The instrument is given when the deposit is made. A pledge letter, a memorandum of deposit and similar papers fit this description.
- Not a promissory note or bill of exchange. Those instruments have their own heads.
Clause (b): makes redeemable or qualifies a duly stamped transfer
The instrument "makes redeemable or qualifies a duly stamped transfer, intended as a security, of any marketable security". Here the security is not pledged but transferred, with a stamped transfer already made. The separate instrument that makes the transfer redeemable, or qualifies it, is the one within clause (b). So if shares are transferred to a lender as security and a side letter says they will be re-transferred on repayment, the side letter falls here.
The charge
In either case the instrument "shall be chargeable with duty as if it were an agreement or memorandum of an agreement chargeable with duty under Article No. 5 (c) of Schedule I."
Article 5 of Schedule I covers "agreement or memorandum of an agreement". Under the head for agreements, clause (c) is "if not otherwise provided for". The central Schedule prints "Eight annas" against that clause, an old-money amount quoted as printed. It is not the duty payable today; the duty actually payable on an agreement is fixed by the State where the instrument is executed. The Article is explained in the article on Article 5 of Schedule I.
Section 23A(2): release or discharge
Sub-section (2) reads: "A release or discharge of any such instrument shall only be chargeable with the like duty." The word "only" fixes the ceiling: the release or discharge is charged with the like duty, and nothing more.
Why section 23A exists alongside Article 6
Article 6 of Schedule I deals with an agreement relating to the deposit of title-deeds, or the pawn or pledge of movable property, by way of security for a loan or debt. Its first limb, as printed, speaks of the deposit of title-deeds "other than a marketable security". Marketable securities therefore sit outside that limb on the printed words. Section 23A fills this by charging the paper that goes with a deposit of marketable securities as an agreement under Article 5(c). The Article 6 head is explained in the article on deposit of title deeds, pawn or pledge.
| Instrument | Treatment under section 23A |
|---|---|
| Pledge letter or memorandum given on deposit of shares as loan security | Chargeable as an agreement under Article 5(c) |
| Instrument making a duly stamped security transfer redeemable | Chargeable as an agreement under Article 5(c) |
| Instrument that qualifies such a transfer | Chargeable as an agreement under Article 5(c) |
| Release or discharge of any such instrument | Only the like duty |
| A promissory note signed for the loan | Not within section 23A (excluded in the opening words) |
A worked example
Vikram Finance Limited lends money to Deepa against a deposit of listed shares. On the day of the deposit, Deepa signs a short pledge letter recording that the shares are held as security for the loan. This is an instrument given upon the occasion of a deposit of a marketable security by way of security, so under section 23A(1)(a) it is chargeable as an agreement under Article 5(c). When the loan is repaid, Vikram signs a release of the pledge. Under section 23A(2), the release is chargeable only with the like duty. If Deepa had also signed a promissory note for the loan, the note would be outside section 23A and charged under its own head. The amounts that apply to the agreement are those fixed by the State where the letter is executed; the central Schedule prints "Eight annas" for Article 5(c).
Need help documenting a loan against securities?
Pledges and security transfers produce several papers: the letter, the transfer, a side letter and a release. A loan documentation support review can sort which papers the Act charges and how, so that the loan file is complete before funds move.
Key takeaways
- Section 23A catches instruments given on a deposit of a marketable security as security, and instruments that make a security transfer redeemable or qualify it.
- They are charged as agreements under Article 5(c) of Schedule I.
- A release or discharge of such an instrument is charged with only the like duty.
- Promissory notes and bills of exchange are outside the section.
- The central Schedule prints "Eight annas" for Article 5(c); the duty payable is fixed by the State where the instrument is executed.
Read next
- Article 5 of Schedule I to the Indian Stamp Act, 1899: agreement or memorandum of agreement and brokers note
- Article 6 of Schedule I to the Indian Stamp Act, 1899: deposit of title deeds, pawn or pledge
- Section 24 of the Indian Stamp Act, 1899: transfer in consideration of debt or subject to mortgage
- What are charge, mortgage, hypothecation and pledge
Disclaimer: Based on the consolidated text of the Indian Stamp Act, 1899 published by the Department of Revenue, whose latest amendment shown is Act 13 of 2021, as consulted on 2 October 2026. Only the central text is covered: stamp duty on most instruments is fixed by the law and schedule of the State where the instrument is executed, and State amendments, rules, notifications and later amendments should be checked. This article is general information, not legal advice; check the official text before acting.