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The cost of your home is not limited to the sum you pay to the builder or the seller. You have to pay stamp duty, registration fees, and relevant franking charges to legalize your ownership. Here is a brief explanation of stamping and franking charges on home loans to help you understand why you need to pay these.
What is the stamp duty on a home loan agreement?
Stamp duty is the tax that the respective state government applies to any financial transaction regarding the purchase of a property. The state levies the charge to legalize the papers transferring the title of a property from the seller to you, the buyer. The fee differs from state to state.Along with the registration papers, the stamp duty on home loan makes your home loan agreement admissible as legal evidence. The stamping charge on your home loan agreement is a percentage of your home loan. It depends upon the state where you avail of the loan.If you want to shift your home loan to a different lender that offers a lower home loan interest rate , you will have to pay stamp duty on home loan transfer.
What are franking charges on a home loan??
Franking is the process of confirming that you have paid the stamp duty. Previously, documents printed on non-judicial stamp papers acted as proof of stamp duty payment. The government introduced franking to eliminate frauds using counterfeit stamp papers. Franking involves applying a distinctive stamp on the document to attest stamp duty payment.Franking applies to your property sale documents as well as your home loan agreement. You have to submit your home loan agreement, printed on a plain paper, to an authorized bank or franking agency. They will apply the stamp using a franking machine. The franking charge on the home loan varies from one state to another and may cost about 0.1 of the total home loan amount.
What is the difference between stamp duty and franking charges?
- Stamp duty is the tax that makes property documents legally valid, while franking charges are levied for certifying that the buyer has paid all applicable taxes.
- Stamp duty is paid to the Sub-Registrar of Assurances. Franking charges are paid to the banks or agencies that perform the franking.
Your home loan will not cover the stamp duty and franking charges. You need to pay these out-of-pocket and thus, arrange for funds accordingly.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.