All You Need to Know About Franking Charge

Purchasing a property in India is a long process. While validating the purchase and securing a home loan is one aspect of the process, the other is paying all the taxes and miscellaneous charges to the government and related authorities. 

Among these additional charges, the point of discussion in this blog is franking charges related to the properties. While it is one of the most important points of a property purchase, not a lot of people are aware of it and often overlook it. As a result, they sometimes face unnecessary challenges during the process. So, let’s demystify this concept and understand what it is.

What are Franking Charges?

Franking charges meaning an additional amount levied to stamp your property documents, indicating that the necessary stamp duty has been paid. This process involves contacting your bank, from where you are taking the home loan, any franking agency, or relevant government offices to pay the charges and get the stamp. 

Now, this stamp acts as a proof of payment of stamp duty. It means the property transaction is legal, and all the property-related papers also stand valid.

Relevance of Franking Charges in Housing Societies

In the context of housing societies, franking charges are highly relevant. It ensures that all the property transactions are legally binding and valid. Whether it is a sale of a property or simply leasing and renting a property, franking helps verify these transactions and provides the needed sense of security and legitimacy.

Therefore, for property buyers of housing societies, understanding franking charges is important to ensure a smooth property ownership experience.

How are Franking Charges Calculated?

Franking charges are calculated on the total property value. In most cases, they are part of stamp duty and levied together, so property buyers don’t need to pay them separately. For instance, if the stamp duty of a particular state is 8% and franking charges are 0.1%, then the actual stamp duty is 7.9%.

In India, the rate of franking charges varies from one state to another but mostly remains in the region of 0.1% to 0.2%. So, if you purchase a property of Rs.60 lakh and the franking is 0.2%, then you need to pay Rs.12,000 as this charge.

Therefore, before buying a property, make sure you research and find the franking charges. Also, check whether it is calculated independently or offset against the stamp duty. Doing this will help you in budgeting for these additional charges and avoid paying extra.

Process of Franking in Housing Societies

The process of franking in Indian housing societies includes the following steps –

Step 1: To commence this process, you first need to get hold of all the original property papers

Step 2: Next, you need to check whether you have to pay additional franking charges or along with the stamp duty

Step 3: Once you are confirmed, then you need to contact a bank or an authorised agency that renders this service

Step 4: Once you are there, complete the paperwork and pay the charges

Step 5: The concerned agency or bank will then stamp the document and give you a receipt for the payment of these charges, and you are done

Common Documents Requiring Franking in Housing Societies

The papers required for franking are the following –

• Sale agreement
• Lease deed
• Transfer of membership
• Loan agreements
• Other important documents

How to Pay Franking Charges?

Now, there are mainly two ways of paying the franking charges, online and offline. In the case of online, you can simply opt for NEFT or other funds transfer processes to complete the transaction.

On the other hand, for offline transactions, you can use cheques, demand drafts, and cash to complete the process.

Exemptions and Concessions on Franking Charges

The exemptions and concessions on franking charges are a matter of the state government. Therefore, it is difficult to list down a set of areas where they will be applicable as they will vary from one state to another.

However, some common areas where exemptions and concessions on franking charges can be witnessed include –

• First-time homebuyers
• Women homebuyers
• Agricultural land
• Property for charitable or non-profit organisations
• Properties purchased by senior citizens

Impact of Franking Charges on Property Transactions in Housing Societies

The impact of franking charges on property transactions in housing societies is significant. Firstly, it validates any property dealing within the society and ensures everything is in order. Moreover, it maintains transparency and lowers the risk of fraud and disputes.

Secondly, the franking charges also drive up property prices. Even though the percentage in discussion is small, it still has an important impact on the overall price of the property. So, as a prospective buyer, you need to consider these charges while budgeting for the property purchase.

Final Words

To sum up, understanding the meaning of franking charges is important to ensure a smooth and transparent transaction of property, especially in housing societies. Since these charges play a vital role in validating and legalising documents, as a property buyer, you must have all the necessary knowledge to avoid facing any hiccups during property dealing and enjoy a smooth experience.

Society Related Article:

Housing Society Fund Utilisation

Common Area Maintenance Charges

Gated Community

Society Corpus Fund

Automatic Boom Barrier

FAQs

1. What are franking charges in the context of housing societies? 

Franking charges in housing societies refer to the fees paid for stamping legal documents such as sale agreements, maintenance agreements, or share certificates to indicate that the necessary stamp duty has been paid.

2. Why do housing societies need franking? 

Housing societies need franking to ensure that all legal documents related to property transactions, membership transfers, and maintenance agreements are duly stamped and legally valid as per government regulations.

3. Who is responsible for paying franking charges in a housing society? 

The responsibility for paying franking charges usually falls on the party initiating the document, such as the property buyer in the case of a sale agreement or the society member when transferring membership or shares.

4. How are franking charges calculated for housing societies? 

Franking charges are calculated as a percentage of the document’s value. This percentage can vary by state but typically ranges from 0.1% to 0.2% of the document’s value.

5. Where can housing society members get documents franked? 

Documents can be franked at authorised banks, franking agencies, or designated offices of the sub-registrar in the respective state or city.