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What is Franking, Charges & How is this Different from Stamping?
The process of franking is often confused with stamping. Therefore, getting a clear idea about them is essential to avoid the hassle while dealing with legal paperwork while purchasing a property. If you want to know what franking is, its differences from stamping and other crucial information, keep reading!
What Is Franking?
Franking is a process of stamping legal property documents. In this process, authorised banks either attach a specific denomination that confirms the stamp duty payment or stamp the legal documents using a franking machine.
How Is Franking Different from Stamping?
There are several differences between franking and stamping, which are listed in the table below:
Franking is a process of stamping legal property papers.
Stamping is an act of tax payment to the government to get approval for property documents while purchasing a home.
Banks may levy a maximum of 0.1% of the franking charge on the transaction value, which is adjusted against the stamp duty paid.
Stamp duty may range between 4% to 6% and is charged on a property's market value, ready reckoner rate, consideration value or circle rate, whichever is higher.
Authority to whom the charge is to be paid
You need to pay franking charges to banks or agencies authorised to stamp on legal documents using franking machines.
You need to visit the sub-registrar's office to pay the stamp duty or go to the state's portal to pay it online.
How to Calculate Franking Charges?
Franking charges differ from one state to another. This means franking charges in Maharashtra are distinct from that in Telangana. Usually, franking charges are levied at 0.1% on the purchase value. So, if you have purchased a property valued at ₹ 40,00,000, you need to pay a franking fee of ₹ 4,000.
Additionally, note that this franking charge is a part of the stamp duty. Therefore, if you need to pay 6.5% of the stamp duty in your state, then pay 6.4% as stamp duty to the sub-registrar's office and the remaining amount to the franking authority.
What Is the Procedure for Franking?
The relevant authority enters all the clauses and essential information on plain paper and makes it ready for signature by the appropriate authority. Now, you need to apply for franking through an authorised bank or go to a franking agency. Once it is approved, the authorised bank or agent will stamp this legal paper. This legal document must be submitted to the sub-registrar's office to pay the stamp duty and registration charges.
What Are the Alternative Options Other Than Franking?
There are also other alternative payment options, such as buying pre-embossed stamp papers or e-stamping. It is often difficult to get all denominations in case of pre-embossed stamp paper from vendors and authorised banks. Additionally, you may find it further challenging to verify the authenticity of a stamped paper.
Therefore, e-stamping is an ideal alternative because it is a tamper-proof and secured mode of paying stamp duty. You can use internet banking to pay the stamp duty online without any hassle. If you do not have access to the internet, you can pay the stamp duty using a bank challan.
You can opt for franking only when you wish to pay the charges through demand draft or cash. Moreover, note that franking rules are not similar across states, and quota limits can create a problem for some home buyers.
Is Franking a Suitable Option to Pay Stamp Duty?
Every payment mode has advantages and disadvantages. So, if you consider pre-embossed stamp paper, then you may not find it for every denomination. Besides, it is also not possible for you to check the authenticity of a vendor.
E-stamping is more secure but cancelling it is difficult. In the case of franking, the relevant authority can do this quickly if you pay the charges through demand draft or cash. However, you must remember that franking charges and guidelines vary across states, and a limited quota may pose a problem.
Knowing what franking is and other related details are essential, especially for new home buyers, to arrange all the formalities beforehand to avoid hassle later.