When planning to buy a house, it is imperative to know about all the charges that come tagged along with a property purchase. A franking charge is one such charge that a homebuyer should be well-aware of to avoid the financial strain later.

While you must have heard about various charges involved in a property purchase such as home loan processing fee, legal fees, and stamp duty; franking charges are lesser known. Typically, a franking charge is a fee imposed by the financing institution or agency for stamping the property papers that serve as a legal proof of payment of stamp duty and all other necessary taxes levied on the transaction.

Special machines called ‘franking machines’ are used in the stamping process and are installed only in the sub-registrar’s office, authorised banks and agencies. The machines contain a unique adhesive stamp that is affixed on the document.

Other important facts about franking charges -

  • Franking chargeThe franking charges levied by financial institutions and agents can differ across States. While some charge a flat fee, others levy a percentage of the sale value. Generally, it amounts to 0.1 percent of the total transaction value. For instance, a property worth Rs 50 lakh would attract Rs 5,000 as a franking charge. Overall, franking fee along with multiple other charges can substantially increase the final price of the property.
  • In many States, you can also offset franking costs against the stamp duty. For instance, if the stamp duty is six percent, the final tax paid after the franking charge, will be 5.9 percent of the property value. However, the scenario varies across States. Therefore, it is essential to know the franking costs prevalent in the State where the property is located.
  • As per the law, only limited banks and agents are authorised to install franking machines and render the services. Also, franking services are offered only during certain hours of weekdays.
  • Each sanctioned bank and agent is issued only limited franking quotes/stamps that are affixed on the documents. Moreover, it is important to inform the bank in advance since franking the documents entails some prior preparations.
  • The norms and charges involved in the franking process could differ across States, banks and agents.

Undoubtedly, purchasing a property is a lifetime experience. Therefore, it is essential to be well aware of the financial and legal discipline to be able to make prudent decisions. Here is a list of a few other hidden charges  that you may take note of before buying a property.