Franking Vs Stamping Charges for Home Loans in India

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07 JUNE, 2021

While buying a home, it is crucial to know about all the aspects associated with the purchase. There are numerous charges involved while buying a property that can increase the overall cost of your home. Stamping and franking are two such charges, that need to be better understood, as they are often used interchangeably. Keep in mind that these are not covered as part of your home loan. As a first time home buyer it is crucial to understand the difference between the two. Before distinguishing between the two, learn about each term separately.

What Is Franking?

Franking is the process wherein legal documents are stamped. This procedure indicates stamp duty payment confirmation. To frank a document, you’ll need to take it to an authorized franking centre. An application form will be provided to you. All you need to do is, fill out the form, pay stamp duty, and get a stamp affixed on the document to confirm stamp duty payment. To affix the stamp, a franking machine is used. Post franking, you can sign your document.

Understanding Franking in Property Transactions

In property transactions, the process of "franking" refers to the stamping of certain documents to make them legally valid. This practice of franking stamps is significant as it ensures the authenticity and legality of documents related to property transactions, providing security and clarity to all parties involved.

Legal Requirements for Franking Documents

Franking is a legal requirement governed by the Indian Stamp Act, 1899. It mandates that specific documents involved in property transactions must be properly stamped or franked to be considered legally valid and admissible in a court of law.

Types of Documents Requiring Franking

Sale Deeds: These documents, outlining the sale of property, must be properly franked to establish the legality of the transaction.
Gift Deeds: When a property is transferred as a gift, the gift deed must be franked to confirm the authenticity of the transfer.
Lease Agreements: Agreements detailing the lease or rental of property require franking to ensure their legal validity.
Mortgage Deeds: In cases of property mortgages, the mortgage deed must be appropriately franked to provide legal assurance to both parties.
Power of Attorney: Documents granting someone the authority to act on behalf of the property owner must be franked to be legally binding.

Franking is a critical aspect of property transactions, as it not only ensures the legality of documents but also protects the rights and interests of all parties involved, offering transparency and legal recourse in case of disputes.

What Is Stamping?

Stamping is the tax that State governments charge for the transfer of properties or assets. Stamp duty is levied to legalise documents that transfer the property title from the seller to you. Contracts such as home loan papers, mortagage deeds, etc. need to be stamped to be legally valid. But it can differ from one State government to another.

The stamp duty on your home loan and the property registration documents make your loan agreement legally admissible. Common ways of stamping in India include a paper-based method, franking and e-stamping. Though not all modes of stamping may be available in every State, you can opt for any one of them, as per availability.

Difference Between Stamping and Franking Charges

Exploring the franking vs. stamping difference is an integral step towards being informed, we will be using this comparative table for the said purposes:

Factors	Stamping Charges	Franking Charges
Type of Charge	Stamp duty is a tax that State governments charge for legalising the documents involved in purchasing a property	Franking charges are nothing but a fee levied for facilitating your payment of stamp duty. The documents are stamped to verify stamp duty registration.
Importance	Stamp duty registration is mandatory and must be done to avoid a penalty	Franking isn't mandatory as you can opt for e-stamping or purchase stamp papers
Authority for Payment	You must pay the stamp duty charges to the Sub-registrar of Assurances	You must pay the franking charges to the banks or agencies authorised for stamping documents
Charges	Stamp duty is a percentage of the total cost of your property set by the State government	Franking charges can be a flat fee or a percentage of the stamp duty being paid. It is much lower than stamp duty. But this fee also varies from one State government to another.

Advantages and Disadvantages of Franking

Franking, a crucial aspect of property transactions, offers several advantages and disadvantages. Understanding these can help individuals make informed decisions when dealing with legal documentation.

Benefits of Franking Documents

Legally Valid: "Franking" refers to the process of legally stamping documents, such as property agreements, making them binding and admissible in court. This ensures security and authenticity in property transactions.
Transparency: Franking enhances transparency in property deals, reducing the risk of fraud or disputes. It provides a clear legal record of the transaction.
Reduced Stamp Duty: One of the notable advantages of franking is the potential reduction in "stamp duty" charges compared to traditional stamping methods. This can lead to cost savings for the parties involved.
Quick Processing: Franking is generally a faster process compared to traditional stamping, reducing delays in property transactions and expediting the legal process.
Prevents Legal Hassles: Properly franked documents minimise the risk of legal complications, protecting the rights and interests of all parties involved. It provides legal assurance to the transaction.

Drawbacks and Limitations of Franking Stamp

Limited Documents: It's important to note that not all documents can undergo franking. Certain legal documents must be stamped, limiting the applicability of franking.
Franking Charges: While franking can be cost-effective, there are "franking charges" involved, which can vary depending on the transaction. These charges are an additional expense that parties must consider.
Complexity: Understanding the requirements and procedures of franking can be complex for some individuals, especially those unfamiliar with legal processes.

Scenarios Where Franking is Preferred

Franking is preferred in various scenarios, including property sales, gift deeds, lease agreements, and mortgage deeds. It is especially common in property transactions where transparency, legality, and cost-effectiveness are paramount.

Mention about checking eligibility

Now that you are aware of stamping and franking charges on home loans in India, you can consider these separate costs and consider saving in advance. Remember, as we said before, these charges aren’t included in your home loan amount. Keeping these in mind, you can plan your finances and check your eligibility using a home loan eligibility calculator. If you meet the eligibility criteria, you can apply for a home loan, today.

Frequently Asked Questions

1) What is meant by the franking of documents?

"Franking" of documents refers to the process of legally stamping them, often related to property transactions. This stamping is essential to establish their authenticity and legal validity.

2) Why do we do FRanking of Documents?

Documents are franked to ensure their legal validity, prevent fraud, and provide transparency in property transactions, securing the interests of all parties involved.

3) Who Will Pay the Franking Documents Charges?

Typically, the responsibility for paying the "franking charges" is determined through negotiations during the property transaction. It can be borne by the buyer, and seller, or shared between them, depending on the agreement and local practices.

Franking vs Stamping: Meaning, Differences & Advantages