Section 3 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 3 is the charging section of the Indian Stamp Act, 1899. It says which instruments attract duty, and it ties the amount to Schedule I. It covers three situations: instruments executed in India, bills and notes drawn outside India but dealt with in India, and other instruments executed outside India that relate to India and are received there. It then gives two exemptions.
Subject to the Act and the exemptions in Schedule I, every instrument mentioned in the Schedule is chargeable with the duty indicated there, if it falls in one of three groups: (a) executed in India on or after 1 July 1899, (b) a bill of exchange payable otherwise than on demand or a promissory note drawn outside India and then accepted, paid, presented, endorsed or negotiated in India, or (c) another instrument executed outside India that relates to property or things in India and is received in India. Instruments of the Government, and sales of registered ships, are not chargeable.
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 rate; the section tells you only whether a document is chargeable at all. If you are unsure whether a cross-border document is caught, a short agreement drafting review before signing can clear that up.
The opening words are "Subject to the provisions of this Act and the exemptions contained in Schedule I". So section 3 is a starting point. Other sections and the exemptions printed under individual Articles of Schedule I can take an instrument out. The copy also prints "therefore" where "therefor" appears intended in the phrase "the proper duty therefore respectively"; this is a printing point and not a change of meaning.
Clause (a): executed in India
Clause (a) catches "every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or after the first day of July, 1899". Two phrases deserve a note:
- "not having been previously executed by any person" means the charge arises on the first execution. A later signature on the same instrument does not create a second charge under this clause.
- "executed" has the meaning in section 2(12), signed, and includes attribution of an electronic record. See our article on section 2 and the terms instrument, executed and duly stamped.
The footnotes show "India" was substituted for "the States" by Act 43 of 1955, section 2, with effect from 1 April 1956.
Clause (b): bills and notes drawn outside India
Clause (b) charges "every bill of exchange payable otherwise than on demand or promissory note drawn or made out of India on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in India".
Here the charge is triggered by what happens in India, not by the place of signing. The words "payable otherwise than on demand" were inserted by Act 5 of 1927, section 5, and the same footnote shows the word "cheque" omitted. The result, as the text consulted now reads, is that this clause names bills payable otherwise than on demand and promissory notes. How the first holder in India deals with such paper is the subject of section 19, covered in its own article.
Clause (c): other instruments executed outside India
Clause (c) charges every instrument other than a bill of exchange or promissory note, mentioned in Schedule I, which (1) was not previously executed by any person and is executed out of India on or after 1 July 1899, (2) relates to any property situate, or to any matter or thing done or to be done, in India, and (3) is received in India. All three must be met. The time to stamp such an instrument is dealt with in section 18, which gives a window after first receipt in India; it is covered in the article on instruments executed outside India.
The two exemptions in the proviso
| Proviso | Exempt instrument |
|---|---|
| (1) | Any instrument executed by, or on behalf of, or in favour of, the Government, in cases where, but for this exemption, the Government would be liable to pay the duty chargeable on it |
| (2) | Any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the shipping Acts named in the proviso |
The first exemption is limited to cases where the Government would otherwise be the person liable to pay. It does not exempt every document the Government signs; if another party would bear the duty, the words "but for this exemption, the Government would be liable" are not met. The text consulted does not say more.
The second exemption names the shipping Acts in a garbled way. The copy prints "the Merchant Shipping Act 1894, Act No. 57 & 58 Vict. c. 60 or under Act XIX of 1838 Act No. or the Indian Registration of Ships Act, 1841, (CX of 1841) as amended by subsequent Acts". The text is quoted as printed. These are old Acts, and the reader should check the current law for the corresponding provisions; none is named here.
A note on the footnotes and on section 3A
The footnote markers in section 3 run 1, 2, 3, 7, 7, 4, 5, 2, 2 against only five footnotes, so the footnotes are out of step with the text and the official text should be checked. The copy also prints section 3A, headed "Instruments chargeable with additional duty", as omitted by the Refugee Relief Taxes (Abolition) Act, 1973 (13 of 1973), section 2, with effect from 1 April 1973. It has no text to explain.
A worked example
Lotus Exports Private Limited, in Mumbai, signs an agreement for the lease of a warehouse in India, and its foreign buyer in another country signs a separate supply agreement relating to goods to be delivered in India, which is then couriered to Mumbai. The warehouse lease, signed in India, falls under clause (a). The supply agreement, signed outside India, falls under clause (c) only if it is an instrument mentioned in Schedule I, relates to property or a matter or thing in India, and is received in India. Suppose the buyer also draws a bill of exchange payable after ninety days in a foreign city and the Mumbai company accepts it in India. Clause (b) is triggered by the acceptance in India. Nothing here says what the duty is; for that, the Schedule and, for State instruments, the State's law must be read.
Need help with cross-border or unusual documents?
Whether an instrument is chargeable can turn on where it is signed, what it relates to and where it is received. Our agreement drafting team can look at the document and the planned signing arrangements, and flag points to settle before execution.
Key takeaways
- Section 3 is the charging section: Schedule I instruments are chargeable at the duty indicated there.
- Clause (a) catches instruments executed in India; clause (b) bills payable otherwise than on demand and notes drawn outside India but dealt with in India; clause (c) other instruments executed outside India that relate to India and are received there.
- Government instruments, where the Government would be the payer, and registered ship dispositions are not chargeable.
- The shipping Acts reference is garbled in the copy; the footnote markers are out of step.
- Section 3A is omitted.
Read next
- Section 1 of the Indian Stamp Act, 1899: short title, extent and commencement
- Section 4 of the Indian Stamp Act, 1899: several instruments in one sale, mortgage or settlement
- Stamp duty exemptions: when no duty is payable
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.