E-stamping is the way of paying stamp duty on an Indian agreement online, instead of buying stamp paper. Stamp duty is a tax that state governments charge on many kinds of documents, such as rental agreements, loan agreements, property sale deeds and company agreements. The amount depends on the state and on the kind of document.
Stamp duty matters in court. Under Indian stamp law, a document that should carry stamp duty but does not is generally not accepted as evidence until the duty and a penalty are paid. So a lender or a landlord who skips the duty may find the agreement hard to enforce later.
For decades, stamp duty was paid by buying stamp paper from a licensed vendor and printing the agreement on it. Stamp paper could be forged, and in the early 2000s a large fake stamp paper racket was found. E-stamping replaced paper in most states. In most of these states, the government appointed the Stock Holding Corporation of India (SHCIL) to run the system. Each payment produces an e-stamp certificate with a unique number. Anyone can check the certificate online, on the SHCIL website, by entering that number.
Take, for example, a young engineer renting a flat in Bengaluru. The rent is ₹28,000 a month for 11 months, with a deposit of ₹1.5 lakh. The rental agreement is prepared on a website. The website works out the duty under Karnataka's rules, from the rent and the deposit. Say it comes to ₹1,700. The website pays this amount through the e-stamping system and receives a certificate with its unique number. It places the certificate as the first page of the agreement's PDF. Then the landlord and the tenant both sign with Aadhaar eSign. Each enters an OTP sent to the mobile number linked to their Aadhaar. Aadhaar eSign is part of India's digital public infrastructure, the national systems that any company can build on.
Businesses use e-stamping at a much larger scale. A digital lender may sign 2,000 loan agreements a day, and each one needs its own stamp. So its loan origination system sends every agreement to an e-stamping platform, which buys the stamps in bulk and attaches each certificate automatically. A loan against property also needs a stamped mortgage document. Companies stamp their contracts with suppliers in the same way, from their CLM system.
E-stamping is often confused with electronic signature, but the two do different jobs. Stamp duty is a tax that the state collects on the document. A signature shows that each person agreed to it. Most agreements need both, and in that order: the stamp first, then the signatures. Some documents must also be registered at the sub-registrar's office, such as a property sale deed, and that is a third, separate step. Registration is one reason why many rental agreements in India run for 11 months: rentals of a year or more must be registered.