E - stamping E - stamping is a latest form of stamping which has made the stamping procedure much convenient. Franking Franking, is a process of actually getting the documents stamped. This process includes getting the documents marked or stamped, indicating that the documents are legal and the stamp duty levied on the documents has been paid.
For this, we have to first prepare the documents. These documents are then taken to a Bank, or franking centre. Once the stamp duty is paid, the centre will mark the documents to indicate that the stamp duty has been paid. This process is called franking. The said documents need to be signed after franking them. Alternately, one can also buy printed stamp papers. These are documents that have already undergone the process of franking.
The payable stamp duty is included in the cost of the papers. Hence, these documents are ready to be just signed and registered. They make the process quite easy, but can only be used in certain situations. Written by Mr. Souvik Chatterjee and Ms. There are other forms of payment, which include purchasing pre-embossed stamp papers or e-stamping.
Pre-embossed stamp paper may be difficult to get for all denominations, from authorised banks and vendors. Moreover, it is tedious for a common man to check the authenticity of the stamped paper. Therefore, e-stamping on online franking has become popular, as it is a more secure and tamper-proof method of stamp duty payment. The transaction can easily be done online, using internet banking. Those who do not have online net banking activated, can use a bank challan for stamp duty payment.
Franking is only advisable if the payment is done through cash or demand draft. However, the franking rules are not uniform and vary across states. Moreover, quota restriction also creates issues for the buyer. While all modes of payment have their pros and cons, pre-embossed stamp paper may be difficult to find, for all denominations. Moreover, a common man may have no means of verifying the authenticity of a vendor.
Naturally, an e-stamp paper is more secure and tamper-proof. However, cancelling an e-stamp paper is difficult. Franking can be done quickly, if the payment is made in cash or through demand draft. With that being said, the rules and charges for franking are not uniform and the limited quota may be a problem. As more and more states adopt e-stamping, because of the ease and authenticity that it offers, franking may be completely replaced by e-stamping in the coming time.
It is mandatory to pay stamp duty for a legal document and franking is one of the ways of getting the legal document stamped. Before executing the agreement signing the papers , you will have to take it to an authorised bank or franking agency.
Skip to content. Table of Contents What is franking? What is difference between franking and stamping? So, a shareholder receiving the dividend should not be obligated for the tax on that dividend when it comes to paying their individual income taxes. That would constitute double taxation. Franked dividends eliminate this double taxation by giving investors a tax credit, commonly known as a franking credit , for the amount of tax the business paid on that dividend.
The shareholder submits the dividend income plus the franking credit as income but will end up being taxed only on the dividend portion. There are two different types of franked dividends, fully franked and partially franked. In contrast, shares that are not fully franked may result in tax payments for investors.
Businesses sometimes claim tax deductions, perhaps due to losses from preceding years. That allows them to avoid paying the entire tax rate on their profits in a given year. When this happens, the business does not pay enough tax to legally attach a full tax credit to the dividends paid to shareholders. As a result, a tax credit is attached to part of the dividend, making that portion franked.
The rest of the dividend remains untaxed, or unfranked. This dividend is then said to be partially franked. The investor is responsible for paying the remaining tax balance.
The tax advantages of franked dividends for investors are apparent, but there are additional benefits for markets and society. The classic argument against double taxation of income is that it deters investment in publicly traded companies that issue dividends. Many small businesses have flow-through taxation, so investors only have to pay income taxes. Large firms must pay corporate income tax, and then their investors are taxed again on the dividend income.
Double taxation seems unfair on the surface. Furthermore, it distorts investment choices, potentially leading to reduced economic efficiency and lower incomes. Franked dividends may have additional benefits within the stock market.
Because unfranked dividends suffer from tax disadvantages, there was a trend away from issuing them. Growth stocks in the U. Stocks that do not issue dividends are necessarily more speculative , so markets become less stable as those companies succeed.
In the long-run, reinvesting in firms instead of issuing dividends reduces competition, efficiency, and consumer choice. Franked dividends help to create more stable and competitive markets by lowering the tax burden on dividends. The fund changed its investment objective and name in June Australian Tax Office. Dividend Stocks.
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