Stamp Duty to be Paid on LLP Agreement: What You Need to Know
If you are planning to form a Limited Liability Partnership (LLP) in India, it is essential to understand the stamp duty that needs to be paid on the LLP agreement.
The LLP agreement, which serves as the primary document that regulates the rights and obligations of the partners in an LLP, needs to be stamped as per the Indian Stamp Act, 1899. The stamp duty on the LLP agreement varies from state to state and is applicable based on the capital contribution made by the partners or the value of the LLP property.
Stamp Duty Applicable on LLP Agreement
The stamp duty on an LLP agreement is calculated based on the capital contribution or the value of the LLP property. The stamp duty rates on LLP agreement vary from state to state and can range from 0.1% to 1% of the capital contribution or the value of the LLP property.
For example, if the capital contribution in an LLP is Rs. 10 lakhs, and the stamp duty rate applicable in that state is 0.3%, then the LLP agreement`s stamp duty would be Rs. 3,000. Similarly, if the value of the LLP property is Rs. 50 lakhs and the stamp duty rate applicable in that state is 0.1%, then the stamp duty on the LLP agreement would be Rs. 50,000.
Stamp Duty Payment
The stamp duty on the LLP agreement needs to be paid at the time of execution. The LLP agreement needs to be printed on non-judicial stamp paper of the required value, and the stamp duty needs to be affixed on the paper.
The LLP agreement`s stamp duty needs to be paid by the LLP itself or any of the partners as per the LLP agreement.
Penalties for Non-Payment of Stamp Duty
Non-payment or underpayment of stamp duty on the LLP agreement can result in severe consequences such as:
1. The LLP agreement becomes invalid, and the partners lose legal protection.
2. The LLP may have to pay a penalty, which can range from two to ten times the original stamp duty amount.
3. The LLP may face legal action, which can lead to fines and imprisonment.
In Conclusion
As a professional, I recommend that you pay careful attention to the stamp duty applicable on the LLP agreement before executing it. Non-payment or underpayment of stamp duty can result in legal hassles and penalties. It is always advisable to seek professional help in calculating the stamp duty and affixing it on the non-judicial stamp paper.