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Your home loans come with a variety of hidden or undisclosed charges which will be revealed only once your loan is approved and the processing begins. One such charge is the franking or stamping charge.
Franking is a process of confirming the payment of stamp duty. Earlier, printed stamp papers were the only means of confirming stamp duty payment. So any document on which stamp duty has been paid would be printed on a non-judicial stamp paper earlier. However, this led to stamp paper scams in the 2000s involving counterfeiting of stamp papers, the most notable of which was the one involving Abdul Karim Telgi. Through fake stamp papers, the government is estimated to have lost around Rs. 320 billion.
Franking process was introduced as an alternative to stamp papers in order to curb stamp paper forgeries. So when you pay the stamp duty – the tax payable to the government for legalising documents – at authorised banks or franking agencies, the bank/agency will put a stamp on the document to certify that the stamp duty has been paid. This “franking” will be done by putting a special adhesive stamp on the document with a franking machine. This confirms that the stamp duty has been paid, without having to deal with anything that could be forged.
Franking has to be done for your property sale documents as well as the loan agreement. Franking charges, being a government levy, differ from state to state. Franking charges in Karnataka, for example, are a minimum of 0.1% of the sale value or the loan. So if the property you are buying is worth Rs. 45 lakh, your franking charges would be Rs. 4,500. This amount will be deducted from stamp duty, which also varies among states, and registration fees. Currently, in Bengaluru, the stamp duty is 5.6%, so if the franking charge is deducted, you will have to pay 5.5% of the property value in addition to registration fees.
Another 0.1% franking charge will have to be paid on the loan agreement. This means that a total of 0.2% – at the very least – will be spent on authenticating your documents. Please check the franking charge in your state before you begin loan procedure so that the amount does not shock you.