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Tata Capital > Blog > Loan for Home > Franking vs stamping in home loans: Meaning, differences, and charges

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Franking vs stamping in home loans: Meaning, differences, and charges

Franking vs stamping in home loans: Meaning, differences, and charges

Stamping refers to paying the government tax known as stamp duty to make legal documents valid. On the other hand, franking of documents is a particular machine-based method you can use to pay the tax on a document. Franking also lets you imprint proof of that payment. Stamping includes traditional physical stamp paper, digital e-stamping, and franking, meaning paying the relevant government tax. You can complete e-stamping online, but to pay franking charges, you must visit an authorized bank branch during specific working hours.

Franking of documents is the process of stamping legal or financial papers using a specific machine. It proves that the required stamp duty tax is paid.

Many people think stamping and franking are two different charges. However, they are not. Stamp duty is the tax, while franking is one way to pay that tax, along with the methods of stamp paper and e-stamping.

Today, e-stamping is the default in many states. So, what you need to check is which method your state accepts. This guide explains franking meaning, its charges, where it still applies, and its role in a home loan.

What is franking?

Franking, meaning a method of paying stamp duty, is carried out by an authorized bank or agent. A franking machine is used to imprint a mark on a document, confirming that the required stamp duty has been paid. The franking mark is usually placed on the first page of the document.

What is stamp duty?

Stamp duty is a tax charged by state governments on certain legal documents under the Indian Stamp Act, 1899, and state laws. An unstamped or under-stamped document may be inadmissible as evidence and can attract penalties. Stamping means paying this duty, and franking is one of the accepted methods of doing so.

Franking vs Stamping: What is the difference?

Stamp duty is the tax you must pay on certain legal and financial documents. Franking, physical stamp paper, and e-stamping are simply different ways to pay this tax. Many homebuyers get confused because home loan cost sheets often show a separate “franking charge.” However, this is not another tax. It is a service fee charged by the authorized franking agent. Whether this fee is adjusted against the stamp duty or charged separately depends on the state’s rules and practices.

Also Read – Home Loan Disbursement Process

What are the three ways to pay stamp duty: Stamp paper vs Franking vs E-stamping

Stamp paper, franking, and e-stamping are methods to pay the stamp duty. The duty amount does not change based on the method you use.

MethodHow does it work?Where is it used?Key limitations
Physical stamp paperBuy a watermarked stamp paper from a licensed vendorStill used in some states and transactionsBeing phased out in many large states, as it is more prone to forgery
FrankingAn authorized bank or agent uses a franking machine to mark the documentAvailable in selected states through authorized centersRequires a physical visit, so it may be subject to value caps or daily limits
E-stampingA digital stamp certificate with a unique ID is issued through Stock Holding Corporation of India Limited (SHCIL) or a state portalDefault method in most large statesAvailability depends on the state’s e-stamping system

Is franking still available in your state?

The following table explains which states allow franking in India:

StateAccepted stamp-duty methodsNotes
MaharashtraStamp paper, e-stamping, and frankingFranking not valid for rental agreements
KarnatakaStamp paper, e-stamping, and frankingFranking is being phased down due to dependence on physical machines
DelhiE-stamping, stamp paper 
GujaratStamp paper, e-stamping, franking 
Tamil NaduStamp paper, e-stamping, franking 
Uttar PradeshStamp paper, e-stamping 
RajasthanStamp paper, e-stamping, franking 
West BengalStamp paper, franking 

Franking charges: How much do you pay?

Homebuyers usually see two amounts: stamp duty and a franking charge. Stamp duty is the state government tax, calculated as a percentage of the property’s value. The franking charge is a service fee for the franking of documents. Its amount, any cap, and whether it is adjusted against the stamp duty or charged separately depend on the state’s rules.

Check – Home Loan Interest Rates in India

Franking and your home loan: Where it fits?

Stamp duty and franking or e-stamping apply to the property sale agreement and, in some states, the home loan agreement too. Many lenders offer franking services. These costs are paid upfront by the buyer, along with the down payment. Eligible stamp duty and registration charges may qualify for deduction under Section 123 (formerly Section 80C) under the old tax regime in the year they are paid.

Check – Home Loan Eligibility Criteria

How to get a document franked?

The process of getting a document franked is as follows:

  1. Print the document, leaving space on the first page.
  2. Calculate the correct stamp duty.
  3. Visit an authorized franking center.
  4. Pay the stamp duty and service fee.
  5. Get the franking mark.

Do this before or at execution. Some centers have value limits, and some states now accept only e-stamping.

Conclusion

You must understand the difference before you budget. Stamp duty is the tax, while franking, stamp paper, and e-stamping are payment methods. E-stamping is now preferred in many states.

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FAQs

What is franking?

Franking is the process of marking a document to show that the required stamp duty has been paid. It is done using a franking machine at an authorized bank or franking center.

What is the difference between franking and stamping?

Stamping is a broad term for paying stamp duty. Franking is one method of stamping, while e-stamping and stamp paper are other methods.

How much are franking charges in India?

Franking charges vary by state. In addition to stamp duty, some states allow authorized centers to charge a small service fee for franking.

Is franking still allowed in Maharashtra and Karnataka?

Yes. Franking is still available in Maharashtra and Karnataka.

What is the difference between franking and e-stamping?

Franking uses a machine to mark the document after stamp duty is paid. E-stamping is an online system that issues an electronic stamp certificate as proof of payment.

Can a document be franked after it is signed?

The rules of franking of documents vary by state. In many cases, documents are expected to be franked before or at the time of execution. Check the applicable state rules before signing.

Are stamp duty and franking charges tax-deductible?

It depends on the type of transaction and the applicable tax laws. For example, certain homebuyers may claim eligible stamp duty expenses under the Income Tax Act if they meet the required conditions. Franking service charges are generally not claimed separately.
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