A token amount is a small, informal payment to show intent and hold a property while terms are agreed. Earnest money is a larger advance paid under a written agreement to sell, usually forfeitable if the buyer defaults. A booking amount is the term builders use for the first payment on a new flat.
Side by side
Factor
Token amount
Earnest money
Stage
Before the agreement to sell
With the agreement to sell
Size
Small, negotiated
Larger, negotiated
Paperwork
Often only a receipt
Written into the agreement
Refund if the deal fails
As the receipt says; often disputed
As the agreement says
If the buyer backs out
Usually forfeited, if the receipt says so
Can be forfeited if the agreement provides
If the seller backs out
Refund, plus any compensation agreed
Refund and remedies under the agreement
Payment mode
Bank transfer or cheque, with a receipt
Bank transfer or cheque
When Token amount matters
Pay a token only after seeing the title documents, and get a signed receipt stating the price, the property and the refund terms.
When Earnest money matters
Earnest money should be paid only with a signed agreement to sell that sets the timeline and what happens if either side fails.
In more detail
Courts have held that genuine earnest money can be forfeited when the buyer defaults, if the contract says so. A very large sum labelled earnest money can be challenged as a penalty.
For new flats in RERA-registered projects, the builder cannot take more than 10% of the cost as an advance or application fee before a registered agreement for sale.
In bank auctions, the earnest money deposit (EMD) is a refundable deposit to take part in the auction; it is forfeited only on the terms of the sale notice.
Common questions
Is a token amount refundable?
Only as the receipt or agreement says. Put the refund terms in writing before you pay.
How much earnest money is normal?
There is no rule outside RERA projects; it is negotiated. For RERA projects, no more than 10% before a registered agreement for sale.
Should I pay a token in cash?
No. Pay by bank transfer or cheque so there is a record, and get a signed receipt.
Sources
Indian Contract Act, 1872, section 74
Real Estate (Regulation and Development) Act, 2016, section 13
A plain-language summary, not legal or tax advice. Rules set by states differ and change; check the current position for your property.