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Do You know about Franking Charges (Hidden Cost)?
Nov 24, 2018 Real Estate News
We may believe that buying a property with a home loan is a straight-forward expense. However, many of us do not realise that a home loan is not the only amount required to own a house. There are several hidden costs involved, which are called Franking Charges. This payment is made while doing the stamp duty. Please note that stamp duty and franking are two different terms and you must understand the difference.
Franking is the process leading to stamp property documents. Franking machines can be seen installed in sub-registrar's office in the state, which is used to affix documents with stamp or denomination. This is required to showcase that stamp duty has been paid. Earlier, the agreement used to be printed on the non-judicial stamp papers. With the introduction of franking, the fear of scams has reduced. You may also hear about e-stamping, an alternative which is more reliable as it’s error-free.
Know About Stamp Duty Versus Franking
Stamp duty is required for all legal documents for their authenticity. This duty may vary from 4 to 10 per cent of that of the property value, which is a levied by the government as a tax on the property documents. Besides, you will also have to bear a one-time property registration fee, which is one per cent of the property value.Franking is the process leading to stamp property documents. Franking machines can be seen installed in sub-registrar's office in the state, which is used to affix documents with stamp or denomination. This is required to showcase that stamp duty has been paid. Earlier, the agreement used to be printed on the non-judicial stamp papers. With the introduction of franking, the fear of scams has reduced. You may also hear about e-stamping, an alternative which is more reliable as it’s error-free.
Know SomeVital Facts
- Franking documents is done by charging some fees for the service provided by banks as well as the agent. This could be around 0.1 per cent of the sale value or a loan amount. However, this amount can be deducted from the stamp duty.
- You must ensure to check the franking charge in your state as it varies for each state. The franking fee is charged on the loan agreement.
- The Reserve Bank of India (RBI) directed in the year 2015 that lenders must include the stamp duty, the registration and any other document-work-related charges during the calculation of the loan amount eligibility for a borrower where the cost of the property is up to INR 10 lakh.
- Some lenders may require you to pay small amounts in cash while for more significant amounts you can pay through pay order.
- Please note that not all authorised banks or any franking agencies follow the same rules when it comes to franking or any charges involved in the process. Such rules may differ from one state to the other. It may even vary from bank to agent even if within the same state.
- Lenders have a limited quote for franking, and they offer the services for certain hours in a working day. You need to verify if the bank or agency is an authorised one.
