Table of Contents
- What is franking?
- What is difference between franking and stamping?
- How are franking charges calculated?
- Franking charges on loan agreements
- Is GST applicable on franking charges?
- Is TDS applicable on franking charges?
- What is the process of franking?
- What are the alternatives to franking?
- Is franking better than other modes of paying stamp duty?
- Future of franking in India
When you buy a property, you need to pay a number of miscellaneous charges to the government and facilitating authorities, in the form of taxes. This includes stamp duty and registration charges. There is another type of cost, which has to be paid during the property transaction, known as franking charges. While most people confuse stamping with franking, these are technically different terms.
What is franking?
Franking is the process of stamping a property document, by using a franking machine. The process is facilitated by authorised banks and agents only, who can stamp your legal papers or affix a certain denomination which acts as a proof that the stamp duty for the transaction has been paid. Franking charges are to be paid to the authority for stamping your paper. The charges are usually 0.1% of the total purchase.
In other words, franking charge is a fee that has to be paid to the bank or agency, for stamping the property papers that serve as a legal proof of payment of stamp duty.
What is difference between franking and stamping?
Stamp duty is the tax that you pay to the government, for authorising the property transaction, whereas franking is the process of getting these legal property papers stamped.
|Stamp duty||Franking charges|
|Stamp duty is a government tax levied on property documents, such as sale deed or transfer of assets or properties.||Franking charges is a minimal charge to be paid to the authorised bank or agent, for stamping or affixing the denomination on the agreement document.|
|Stamp duty varies from 4% to 6%, depending upon the state.||Franking usually does not incur charges but banks may charge up to 0.1% of the transaction value, which can be offset against the stamp duty paid.|
|Stamp duty is paid at the sub-registrar’s office or online on the state’s portal.||Franking is done by authorised banks only but they have limited franking quota and therefore, they offer the services only for certain hours of the working day.|
How are franking charges calculated?
The charges for franking can vary across states. Usually, it is 0.1% of the purchase value. For example, if you have bought a property worth Rs 40 lakhs, the franking fee will be Rs 4,000. Also, remember that this fee is a part of the stamp duty charges. So, if the applicable stamp duty in your state is 6.5%, you would need to pay 6.4% at the sub-registrar’s office and the remaining to the franking authority.
Franking charges on loan agreements
Franking has to be done for loan agreements, as well. Franking charge of around 0.1% will have to be paid on the loan agreement, over and above the property document charges. This means that a total of 0.2% – at the very least – will be spent on authenticating your documents.
Is GST applicable on franking charges?
As per the Goods and Services Tax Act, 2017, there is no GST payable on judicial stamp papers, if it is sold by government treasuries or vendors authorised by the government. Hence, franking charges are exempt from GST.
Is TDS applicable on franking charges?
No, TDS is not applicable on franking charges, as the Central Board of Direct Taxes (CBDT) has granted exemption from tax deduction at source (TDS) on certain payments made by businesses/individual towards financial services offered by banks.
What is the process of franking?
Franking of a document is done, when all the clauses and required content is typed on a plain sheet of paper and the documents are ready for signing. The applicant needs to file the application, with the details of franking. Once the franking is done by authorised banks and agents, the legal documents should be presented at the sub-registrar’s office, for registration and stamp duty payment.
What are the alternatives to franking?
Franking is one of the most common methods for paying stamp duty to the government. There are other forms of payment, which include purchasing pre-embossed stamp papers or e-stamping.
Pre-embossed stamp paper may be difficult to get for all denominations, from authorised banks and vendors. Moreover, it is tedious for a common man to check the authenticity of the stamped paper.
Therefore, e-stamping on online franking has become popular, as it is a more secure and tamper-proof method of stamp duty payment. The transaction can easily be done online, using internet banking. Those who do not have online net banking activated, can use a bank challan for stamp duty payment.
Franking is only advisable if the payment is done through cash or demand draft. However, the franking rules are not uniform and vary across states. Moreover, quota restriction also creates issues for the buyer.
Is franking better than other modes of paying stamp duty?
While all modes of payment have their pros and cons, pre-embossed stamp paper may be difficult to find, for all denominations. Moreover, a common man may have no means of verifying the authenticity of a vendor. Naturally, an e-stamp paper is more secure and tamper-proof. However, cancelling an e-stamp paper is difficult. Franking can be done quickly, if the payment is made in cash or through demand draft. With that being said, the rules and charges for franking are not uniform and the limited quota may be a problem.
Future of franking in India
As more and more states adopt e-stamping, because of the ease and authenticity that it offers, franking may be completely replaced by e-stamping in the coming time. Recently, several reports suggested that the Karnataka government may soon end physical franking of documents and make electronic stamping mandatory, for the execution of instruments such as sale agreements, mortgage and title deeds, to prevent stamp duty and franking frauds, which impact the government’s revenue.
What is franking of documents in India?
Franking, is a process of getting the documents stamped.
Is franking mandatory?
It is mandatory to pay stamp duty for a legal document and franking is one of the ways of getting the legal document stamped.
What is the procedure for franking?
Before executing the agreement (signing the papers), you will have to take it to an authorised bank or franking agency.