Regulatory compliance can make or break a transaction. In the bustling world of property deals and loan agreements, one small mark can carry enormous weight. While most of us have heard of stamp duty, a transactional tax that breathes legal life into documents, its close cousin—franking—often remains shrouded in mystery. Yet understanding the difference between the two can save you time, money and a headache at the registrar’s office.
What is Franking?
Franking is a mechanized process used to indicate that stamp duty on a document has been duly paid. Rather than relying on physical stamp papers, an authorized bank or agent employs a government-standardized franking machine to imprint a colored mark directly onto the document. This imprint serves as irrefutable proof of payment and is recorded electronically by the machine.
Customers must visit one of these licensed banks or agents to have their documents franked; no other parties can legally perform the franking process.
Why Shift from Stamp Paper?
- Risk of Forgery: Physical stamp papers can be counterfeited.
- Stock Shortages: Vendors sometimes run out of high-value stamp papers.
- Refund Delays: Unused stamp paper refunds can take months.
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How Does Franking Work?
- You prepare your typed document on plain paper.
- You fill out a simple form and pay the stamp duty plus a small franking fee.
- The franking machine prints a coloured stamp and logs the transaction electronically.
- You sign the document after it’s franked.
Suggested Read: Stamp Duty in Top 10 Cities
Documents Required for Franking
- Sale Deeds: To validate the property sale.
- Gift Deeds: To confirm the legitimacy of property transfers as gifts.
- Lease Agreements: To ensure legal enforceability.
- Mortgage Deeds: Offers legal security in property mortgage agreements.
- Power of Attorney: To grant legal authority to act on behalf of the property owner.
How are Franking Charges Calculated?
Franking charges are calculated as a small percentage of the total stamp duty payable on a document. In most states, the combined rate for stamp duty and franking is fixed—oftentimes 8 % in Karnataka—of which a nominal portion (e.g., 0.1 %) is earmarked for franking. The factors used by a franking-charges calculator include:
- Market value of the property: Higher values lead to proportionally higher stamp duty and franking fees.
- Type of property and built-up area: Residential versus commercial use, and the number of floors, can affect duty rates.
- Location: Urban rates often exceed rural ones; metropolitan municipalities may levy premium charges.
- Owner’s age and gender: Some states grant concessions (for example, reduced rates for female purchasers or senior citizens).
Illustrative Example (Karnataka)
- Property value: ₹20 lakhs
- Total stamp duty rate: 8 % → ₹1,60,000
- Franking portion: 0.1 % of property value → ₹2,000
- Net stamp duty: 7.9 % → ₹1,58,000
Thus, the customer pays ₹1,60,000 in stamp duty, of which ₹2,000 is remitted as the franking fee.
Suggested Read: Stamp Duty Charges in Karnataka
Franking vs. Stamping
| Aspect | Stamp Duty | Franking Charges |
|---|---|---|
| Definition | Tax paid to the government to legalise property documents | Fee for machine-stamping proof of paid stamp duty |
| Paid To | State government (at Sub-Registrar’s office or eStamp portal) | Authorised bank or franking agency |
| Calculation Basis | Percentage of property value (varies by state, location, age, property type) | Fixed percentage of the property or loan value (commonly 0.1%) |
| Typical Rate | 3–8 % (state-specific slab) | 0.1 % of property or loan value |
| When Paid | During document registration | Before signing, at time of document franking |
| Authority | Stamp Office / Sub-Registrar / SHCIL (for eStamping) | Banks/agents holding a state-issued franking licence |
| Transparency | Clearly quoted at registration | Often bundled into bank processing fees |
Conclusion
In summary, franking is a critical process for validating legal documents, especially in property transactions. It further ensures that you have paid the necessary stamp duty, giving your document legal standing.
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Frequently Asked Questions
The validity depends on the type of document and local regulations. Generally, properly franked documents remain valid indefinitely unless specified otherwise.
No, only certain authorized banks provide franking services.
No, charges vary by state. It is essential to check the specific rates applicable to your location.
We do not recommend it. Ideally, you should frank documents before signing to ensure legal validity. Some jurisdictions may not accept documents franked after execution.
You pay stamp duty as a tax to the government, while franking charges serve as the service fee for validating the stamp duty payment.
Only banks or agencies that hold a valid state-issued franking licence may operate franking machines and impress documents.
No—franking fees for judicial papers are exempt from both Goods and Services Tax and Tax Deduction at Source under the GST Act 2017.
Yes. Banks apply franking charges to loan documents as well, using the state’s prescribed percentage for such agreements.
The property’s market value, type (residential vs. commercial), number of floors, location (urban vs. rural), and owner’s age or gender (where concessions apply) all affect the rates.
Use franking if your state has not implemented eStamping, if you prefer an in-person bank visit, or if you have only a few documents to stamp.
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