Franking and Stamping – What’s The Difference?

In any type of home purchase, whether with your own money or through a home loan, you have to pay certain fees and taxes. For example, loan processing fees or the cost of a technical appraisal of the property by the lender. Other examples of such fees and taxes related to home purchase also include franking or stamping. Are they both the same thing? No, not at all. That is just a misconception. As a home buyer, you should know the distinction between the two. This will allow you to manage your documents and payments correctly. In this blog, we will take you through the broad differences between franking and stamping.

Franking vs Stamping in Property Documents – Key Differences Explained?

Stamping is essentially the payment of a duty which proves that your property documents are legal, whereas franking is proof that indicates that any duty related to stamping has been paid by the home buyer.

What is Stamping?

Stamping refers to the act of paying tax to the government to approve your property documents during a home purchase. These documents often include a sale deed, mortgage papers or a transfer of assets or properties. As part of the stamping process, you have to pay stamp duty and registration charges to make your property purchase legal. As soon as you do that, you get a stamp on your sale agreement. Stamped property documents are legal.

• Nature of the fees
  • Stamp duty confirms that your property documents are legally valid.
• Fees amount
  • Stamp duty and registration charges are calculated on the total cost of your property. Typically, stamp duty lies between 3-10% of the property value. It depends upon various factors like the state where the transaction occurs, the property status, age and gender of the home buyer, etc.
  • For example, stamp duty charges in Mumbai are typically 5% of the total cost of the property. However, in Delhi, stamp duty is around 6% if the property is bought by a man. If a woman buys a property in Delhi, then the stamp duty is around 4%.
  • The registration fee for the property is around 1% of the total property value. Additionally, Rs. 100 are also paid as pasting charges.
• Who authorises the charge?
  • To pay the stamp duty, you have to visit the sub-registrar’s office as per the jurisdiction of your home. You can also pay it online on your state’s portal.

Stamping is performed in various ways. These include the paper-based method, e-stamping or franking.

• The paper-based method is the most traditional way of stamping. In this method, you can buy stamp paper from any official vendor and use it to print your sale agreement.
• E-stamping is a secure, electronic way of paying non-judicial stamp duty. You can do e-stamping online from the comfort of your home. It is approved by the Stock Holding Corporation of India Limited. The process takes only a few minutes compared to the slow traditional paper-based method.
• The third process of getting stamping done is through franking, which we will learn in detail next.

What is Franking?

Franking refers to the process of stamping the legal property papers. Franking is done by authorised banks who either stamp your documents or can attach a denomination to them. Once the bank has marked your documents indicating that stamp duty has been paid, you need to sign them. An alternative way to franking is buying printed stamp papers that have already been franked.

• Nature of the fees
  • Franking charge is the fee paid to complete the stamping of your property documents. It is a confirmation that your stamp duty has been paid.
• Fees amount
  • The franking fees is around 0.1% of the property value or 0.1-0.2% of the home loan value. It also varies from state to state. Alternatively, you also have the option of including the franking charge in the stamp duty itself.
• Who authorises the charge?
  • Only authorised banks or government-authorised agents can carry out official franking.
  • Franking is done only for a limited number of hours at a bank on any given working day, so plan your visit accordingly.

Conclusion

At the end of the day, as a property buyer, you have the option of choosing between franking or stamping. Here are additional pointers:

• If you are applying for a home loan, always check the stamp duty on home loans, franking charges, house registration charges, etc., depending upon your state and lender. This will allow you to save the necessary funds beforehand.
• If you are opting for franking, pre-arrange all the formalities to take place by a certain time to avoid hassles.

Still unsure about franking and stamping charges in your state? Speak with PNB Housing experts today to get clarity and a smooth home loan process .

FAQs

Is franking mandatory in all states, or does it vary by state legislation?

No, franking isn’t mandatory everywhere, it varies from state to state. Some states follow e stamping, while others still use traditional stamping or a mix of both. It’s always best to check your state’s property registration rules or confirm with your lender before finalising your documents.

Does e-stamping replace franking, and can I use e-stamp instead of franking?

Yes, in most cases, e-stamping can replace franking. It’s a faster and safer way to pay stamp duty online without visiting a bank or sub-registrar’s office. However, some states still prefer franking for certain documents, so always confirm which option is accepted before proceeding.

What are the risks of using unstamped or unfranked documents in property or loan agreements?

Using unstamped or unfranked documents can cause serious issues.
• Your agreement may not be legally valid.
• You could face penalties or delays in registration.
• Lenders may even withhold loan disbursal until proper stamping or franking is done.
Simply put, make sure your documents are correctly stamped or franked to stay legally protected.

Can a home-loan lender require franking even if e-stamping is available?

Yes, some lenders may still ask for franking, even when e-stamping is an option. This depends on the lender’s policy and state laws. For instance, PNB Housing may require franked loan documents as proof that stamp duty has been paid before the loan is approved or disbursed.

Who is responsible for paying stamping and franking charges – the buyer, seller or the borrower?

Usually, it’s the buyer or borrower who pays for stamping and franking when purchasing a property or applying for a home loan. However, in some cases, the cost can be shared or decided mutually. It’s always wise to clarify this beforehand to avoid any confusion later.