A Common Compliance Question: Date of Allotment vs. Stamp Duty for Subscription Shares in a Newly Incorporated Company

One question that repeatedly arises in incorporation and post-incorporation compliances is:

What is the date of allotment for shares subscribed in the Memorandum of Association (MoA), and which date is relevant for stamp duty?

This issue often leads to confusion because two distinct legal timelines are involved. Understanding this distinction is critical for Company Secretaries, Chartered Accountants, legal professionals, and founders handling incorporation-related compliances.

This article explains the position in a clear and practical manner.

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1. Subscription Shares under the MoA – When Are They Allotted?

At the time of incorporation, the subscribers to the Memorandum of Association agree to take a specified number of shares in the company. These are commonly referred to as subscription shares.

Legal Position

Subscription shares are deemed to be allotted automatically on the date of incorporation of the company.

This position flows from:

• Section 10 of the Companies Act, 2013, which provides that the MoA becomes binding on the company and its members upon registration; and

• Section 56(4)(a) read with settled secretarial practice, which recognizes that subscription shares do not require a separate allotment process.

Practical Implications

For shares subscribed in the MoA:

• Date of allotment = Date of incorporation

• No PAS-3 is required to be filed

• No separate Board resolution for allotment is required

• No offer letter or application process is involved

The subscribers are only required to bring in the subscription money after incorporation, subject to the applicable provisions of the Act and rules.

In short, the act of incorporation itself completes the allotment of subscription shares.

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2. Common Misconception: Linking Stamp Duty with Date of Allotment

A frequent error in practice is assuming that stamp duty becomes payable on the date of incorporation, since allotment is deemed to have taken place on that date.

This assumption is incorrect.

To understand why, we must examine what stamp duty is actually levied on.

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3. Stamp Duty on Shares – What Triggers It?

Key Principle under Stamp Laws

Stamp duty is not levied on the event of allotment. Instead, it is levied on the instrument evidencing the transaction.

In the case of shares, the relevant instrument is the share certificate.

Therefore:

• Stamp duty becomes payable only when a share certificate is issued, and

• The relevant date for stamp duty is the date of issue of the share certificate, not the date of incorporation or allotment.

This principle is consistent with the Indian Stamp Act, 1899 (as amended) and the respective State Stamp Acts, as applicable.

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4. Timeline Explained with an Example

Let us consider a simple illustration:

• Date of incorporation: 1 April 2025

• Subscription shares: 10,000 equity shares subscribed in the MoA

• Share certificates issued on: 25 April 2025

Compliance Position

Particulars	Relevant Date
Date of allotment	1 April 2025 (date of incorporation)
Requirement of PAS-3	Not applicable
Trigger for stamp duty	Issue of share certificate
Date relevant for stamp duty	25 April 2025

Stamp duty is calculated and paid based on the date and value mentioned on the share certificate, not on the incorporation date.

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5. Statutory Time Limit for Issuance of Share Certificates

Under Section 56(4)(a) of the Companies Act, 2013, a company must issue share certificates to subscribers of the MoA within two months from the date of incorporation.

Accordingly:

• The company has flexibility to issue certificates anytime within this period

• Stamp duty will arise on the actual date of issuance

Delay beyond this period may attract penalties under the Act, but it does not change the fundamental principle regarding stamp duty.

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6. Key Takeaways for Professionals

• Allotment of MoA subscription shares is automatic and deemed to occur on incorporation

• No PAS-3 or allotment resolution is required for subscription shares

• Stamp duty is not linked to allotment but to the issuance of share certificates

• The date of share certificate is the crucial date for stamp duty computation and payment

• Confusing these two timelines can lead to incorrect compliance practices

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Conclusion

In a newly incorporated company, allotment and stamp duty operate on two different legal planes. While allotment of subscription shares is completed by operation of law on the date of incorporation, stamp duty arises only when the company issues the share certificate, as duty is payable on the instrument and not on the allotment event.

A clear understanding of this distinction helps avoid unnecessary confusion and ensures clean, defensible incorporation compliances.

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This article is intended for educational and professional guidance purposes and reflects prevailing legal and secretarial practice.

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Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc

Anshul Goel

LegalMantra.net Team

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