Section 26 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 26 deals with an instrument on which duty depends on an amount or value, but the amount or value cannot be fixed on the day the instrument is signed. It limits what can be claimed under that instrument to what the stamp actually used would cover, and it gives a special rule for mining leases that carry a royalty.
Where an instrument is chargeable with ad valorem duty and its amount or value cannot be ascertained at the date of execution, nothing can be claimed under it beyond the highest amount or value for which the stamp actually used would have been sufficient on that date. A first proviso lets a mining lease be stamped on an estimate of the royalty or share of produce: the Collector's estimate for a Government lease, and twenty thousand rupees a year for a lease by anyone else. A second proviso says that where the Collector has dealt with the instrument under section 31 or 41, the amount he certifies is deemed to be the stamp actually used.
Where section 26 sits
This article explains section 26 as it appears in the consolidated text of the Act consulted (latest amendment shown: Act 13 of 2021). Later amendments should be checked. Stamp duty on most instruments is fixed by the law and schedule of the State where the instrument is executed, so the State of execution must be checked; this article explains the central Act only and does not state any State rate. Section 26 itself names no rate. It works on whatever duty the applicable schedule imposes. If you are drafting an instrument of this kind, a contract review and vetting before signature is the safer course.
Section 26 sits in Part D of Chapter II, which is headed "valuations for duty". It follows the sections on transfers made for a debt or subject to a mortgage (see Section 24) and on annuities and periodical payments (see Section 25). Those sections tell you how to value particular kinds of consideration. Section 26 answers a different question: what if no figure can be fixed at all?
The main rule: the stamp sets the ceiling of the claim
The section applies when two things are true:
- the instrument is chargeable with ad valorem duty, meaning duty that rises with an amount or value; and
- the amount or value of the subject-matter cannot be ascertained at the date of execution or first execution. For an instrument executed before the commencement of the Act, the section covers one where the amount or value "could not have been" ascertained at that date.
In that case the text says that "nothing shall be claimable under such instrument more than the highest amount or value for which, if stated in an instrument of the same description, the stamp actually used would, at the date of such execution, have been sufficient".
Read slowly, this is a ceiling. You look at the stamp that was in fact put on the instrument. You ask: for an instrument of the same description, what is the highest amount or value that this stamp would have covered on the day of execution? That figure is the most that can be claimed under the instrument. The section does not forbid executing an instrument whose value is open. It simply ties the claim to the duty actually paid.
Three points follow from the wording.
- The test is at the date of execution (or first execution), so a later change in the duty table does not move the ceiling.
- The comparison is with "an instrument of the same description", so the schedule entry for that type of instrument decides what the stamp could have covered.
- The section says nothing about penalty or about who must pay more if the claim exceeds the ceiling. It only limits the claim.
A worked example of the ceiling
Take an agreement under which Rohit Verma undertakes to pay Kavita Joshi the full amount of any loss on a shipment, where the loss cannot be known when the agreement is signed. Suppose the instrument is chargeable with ad valorem duty and the stamp used would, under the schedule that applied on the date of signing, have been enough for an instrument stating a highest value of "V". Under section 26, Kavita's claim under that instrument cannot go beyond V, even if the loss turns out larger. If she wants a larger claim to rest on the instrument, the safer course is to stamp it for a higher value, or to have it dealt with under section 31 before signing (see Section 31). Nothing in this example puts a rupee figure on V, because the schedule that fixes it is the State's.
First proviso: the lease of a mine
The first proviso is a special rule for "the lease of a mine in which royalty or a share of the produce is received as the rent or part of the rent". In such a lease the amount actually earned depends on how much the mine yields, so it cannot be known at the start. The proviso says it is sufficient to have estimated the royalty or the value of the share "for the purpose of stamp-duty", and it fixes the estimate in two cases.
| Who grants the lease | Estimate on which stamp duty is paid |
|---|---|
| By or on behalf of the Government (clause (a)) | Such amount or value as the Collector may, having regard to all the circumstances of the case, have estimated as likely to be payable by way of royalty or share to the Government under the lease |
| By any other person (clause (b)) | Twenty thousand rupees a year |
Two things should be noted. First, the proviso then adds that "the whole amount of such royalty or share, whatever it may be, shall be claimable under such lease". So the estimate is for the stamp only. The royalty actually earned is not capped at it. This is the opposite of the main rule, where the stamp limits the claim.
Second, clause (a) gives the Collector an estimating role. Section 56(1) says the Collector's powers "under clause (a) of the first proviso to section 26" are subject to the control of the Chief Controlling Revenue-authority. The words were added to section 56 by Act 15 of 1904, s. 7, according to the footnote. For the Collector's other work see Section 56.
Example: a private quarry lease
Mehra Minerals takes a lease of a limestone quarry from a private landowner, Sunita Rao. The rent is a royalty on every tonne removed. Clause (b) of the first proviso lets the parties pay stamp duty on an estimated royalty of twenty thousand rupees a year, and the lease still entitles Sunita to the whole royalty on the tonnage actually removed. The parties therefore do not have to guess the output of the mine in order to stamp the lease. How that estimate turns into a duty figure depends on the schedule that applies to leases where the instrument is executed.
Second proviso: where the Collector has dealt with the instrument
The second proviso begins "Provided also". It says that where proceedings have been taken in respect of an instrument under section 31 or 41, "the amount certified by the Collector shall be deemed to be the stamp actually used at the date of execution".
- Section 31 lets a person bring an instrument, executed or not, to the Collector for his opinion on the duty.
- Section 41 covers an instrument produced within one year of execution by the person's own motion, when the omission to stamp it properly was due to accident, mistake or urgent necessity (see Section 41).
In either case the Collector certifies an amount, and that amount is treated as the stamp used on the date of execution. This matters for the main rule: the ceiling on the claim is then worked out from the certified amount, not from whatever stamp happened to be on the paper. This gives a way of fixing the position after the event when the stamp first used was too low.
Why section 26 matters in practice
Section 26 is short, but it affects drafting in three places.
- Open-ended indemnities and running-account undertakings. If the amount cannot be fixed, the stamp becomes the cap. Parties who want a bigger claim should stamp for a bigger figure.
- Mining and quarrying leases. The royalty clause can be priced for stamp purposes without fixing the output. The whole royalty remains claimable.
- Instruments corrected through the Collector. The certificate under section 31 or 41 resets the "stamp actually used".
For ordinary agreements, the related duty on the consideration and facts is covered in Section 27, which requires the consideration and all facts affecting the duty to be fully and truly set forth. A document that hides the royalty basis does not get the benefit of an honest estimate. For general valuation rules on the site, see how stamp duty is calculated.
Points to note on the printed text
- The section is printed with the first proviso set in square brackets as inserted matter, and the second proviso follows it. Read them in that order.
- The amount of "twenty thousand rupees a year" is quoted as printed. No later revision is shown in the text consulted.
Need help with an agreement whose value cannot be fixed?
Open-ended indemnities, running-account undertakings and royalty leases are easy to under-stamp. Our team can check the wording, the stamp and the schedule that applies in your State through our contract review and vetting service before anyone signs.
Key takeaways
- Section 26 caps the claim under an ad valorem instrument at the highest value the stamp actually used would have covered at execution, when the value cannot be ascertained.
- A mining lease with royalty or a share of produce may be stamped on an estimate: the Collector's for a Government lease, twenty thousand rupees a year for any other lease.
- The whole royalty or share remains claimable under the lease, whatever it is.
- Where proceedings were taken under section 31 or 41, the amount the Collector certifies is deemed to be the stamp actually used.
- Duty rates come from the schedule of the State of execution; the section sets no rate.
Read next
- Section 27 of the Indian Stamp Act, 1899: consideration and facts affecting duty
- Section 25 of the Indian Stamp Act, 1899: valuation of annuities and periodical payments
- Schedule I: lease, surrender of lease and transfer of lease
- Stamp duty on lease and rent agreement
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.