Property Tax

The Property Tax is also an indirect form of tax like stamp duty and GST. It is also governed by the Income Tax Act, 1961. Any individual owning a land or property has to pay property tax in India. The Government of India is levying property tax either through Municipal corporation or local government. Read on to know more about property tax and related information.

Different Types of Property :

The property in India is divided into four categories:

  • Land :
    • In its basic form, without any construction or improvement.
  • Improvisations made in land :
    • It includes immovable manmade creations like buildings and godowns.
  • Personal property :
    • This includes movable man-made objects like cranes, cars or buses.
  • Intangible property :
    • Anylicenses, patents, etc.

Steps to pay Property Tax in India :

One can pay property tax both online and offline. If you are choosing offline mode, an individual is required to visit municipal office and make submission of the amount at a specific counter accepting property tax. After the completion of procedure, payment receipt issued to the tax payer for future reference.

Online Mode :

  • Log in to the official website of their municipality/city corporation.
  • Select the tab indicating property tax and navigate to the payment option.
  • Choose the property tax online application form depending upon the category under which the property falls.
  • Fill in the required details such as location, property types, and others
  • Select the assessment year and also select the previous year to clear the dues, if any.
  • Provide some other essential details such as plot number, identification number, Revenue Survey number, etc.
  • Select the preferred payment option to complete the online tax payment which could be credit/debit cards or internet banking.

The process to get Tax Application Number :

Log in to the official portal of Municipal Corporations

  • Go the ‘Property Tax Page’
  • Click on ‘GIS-based New PID’ option
  • Click on ‘To Know Your New PID Click Here’ and enter old application
  • Click on ‘Search’
  • Select the name and click on ‘Fetch’
  • Check the details displayed on the page for any discrepancies
  • Click on ‘View your property in Map’ for more information, spot the property on Google map and download or save the detail for future references.

The process to calculate Property Tax Receipt online :

  • Log on to the website of Municipal Corporation
  • To log in, you will get OTP to access the citizen account.
  • After that, the property tax payment details will be displayed on the screen
  • Selection ‘Action’ and then click on ‘tax paid details’
  • Choose ‘download receipt’ option and click on ‘download’ option to complete the process.

How to calculate property tax ?

Property tax = base value × built-up area × Age factor × type of building × category of use × floor factor.

It is based on the property location, with taxes varying from state to state. Every civic operation is using different methods to calculate tax, get here the overview.

The property assessment is based on the following factors:

  • Area of the property
  • Occupancy status (whether it is self-occupied or rented out)
  • Property Type (residential, commercial or land)
  • Amenities available (car park, rainwater harvesting, store, etc.)
  • Construction year
  • Construction Type (multi-storied/ single floor/ pukka or kutcha structure, etc.)
  • Floor space index
  • Carpeted square area of the property

Once these parameters are determined the civic agency can use a formula it deems fit to calculate tax. Different agencies use different formulas. The tax on a property will vary according to the factors mentioned above and can be easily computed online, through the official website of the municipal corporation concerned.

Different ways of calculating property tax in India :

Capital Value system - The property tax is calculated as a percentage of the present market value of the property depending on the locality, under CVS. This is the system of property tax evaluation followed in Mumbai.

Unit Area Value System (UAS) : In this system, the municipal authorities in India find outs the property value depending upon location, land price, and usage. Then multiplies this amount with built-up area to get the actual tax value. This system is followed in cities such as Delhi, Kolkata, Hyderabad, Bengaluru and Pune.

Annual Rental Value System or Ratable Value System (RVS) : Under Annual Rental Value system, first the property’s rental value is calculated considering the property’s proximity to landmark and other amenities, and its condition, size, and location. Finally, the tax payable is calculated on the rental value of the property. This system is followed in Chennai and some parts of Hyderabad.

What would be the interest applicable on the property tax?

On making delay in paying property tax will attract a fine, generally equivalent to percentage of amount due. The interest will vary from state to state. It can fall between 5% to 20% based on individual policies.

For example : Some states waived off property tax while Bangalore decided to slash interest for late payments from 20% to 10%, in a bid to get more people to pay their dues.

Tax Deductions against Income from Property :

Section 24 is titled as "Deductions from income from house property". 'Income from house property' is applicable in the following cases: If you are renting out your house(s), then the rent received will be considered as part of your income

If you have more than 1 house, then the Net Annual Value of the houses, except the house you are living in, will be considered as your income.
If you own only 1 house and you are living in it, the income from house property will be considered as NIL. Any income derived from rent and annual value of additional houses, will be subject to tax after deductions made under Section 24.

Deductions under Section 24 :

There are mainly two forms of deductions under Section 24 of the Income Tax Act :

Standard Deduction- Under this, an individual get exemption from making tax payment up to 30% of annual value and this system is not applicable for those individuals occupying the only house they own.

Interest on loan:

  • Interest paid on the principal amount of the loan availed for construction, renovation, or to fund a purchase of house, is exempt from tax payments.
  • An individual can avail themselves of tax exemption of up to Rs.2 lakh if they take a loan for their self-occupied property.
  • No deduction can be availed for commission or brokerage to arrange the loan or tenant.
  • The purchase of house, construction or renovation should be completed within 3 years of the loan tenure, otherwise an individual can only avail themselves of tax exemption of Rs.30,000 instead of Rs.2 lakh.

Deduction under Section 80C :

Section 80 C of Income Tax Act, 1961 - All homeowners possessing one house property from the date of loan sanction can avail tax exemption. In case your home loan is less than 35 Lakh, and the property value is less than 50 Lakh.

Capital Gains Tax on Property :

The tax will be applicable on the profit earned from the sale of the property. To save yourself from paying additional tax, you can purchase house within two years from the selling date.0
The proceeds from a property sale can also be used to build a dwelling, reducing the amount of capital gains tax on property.

Frequently Asked Questions

  • Who levies property tax?
    The Property Tax is determined by the local administration mainly, urban local bodies like Municipal Corporation and similar organizations.
  • What are ways to get tax exemption?
    You can get property tax exemption based on factors like age, property type, location, etc. If your land is vacant, you are not required to pay property tax on the same.
  • Why the property tax is higher than value of property?
    The property tax can never be higher than property value. It is best to consult administration and clarify.
  • Is property tax deductible from income tax?
    If an individual is filling in for federal income tax return, then the taxpayer can avail tax deduction for the property tax paid throughout the year and earn refund, as applicable.
  • What happened on missed property tax payment?
    If you missed out to pay the property taxes, you will end up with paying penalty charges depending upon the state. In adverse cases, if the owner does not pay even after official notice, then it might lead to imprisonment or strict Government action.
  • What is the property tax payment system in India?
    Capital Value System of the property tax is followed in India, in which the market value of the property is determined by the government depending upon various factors including its location. This is published annually and revised on a yearly basis and is further used to calculate the tax amount.
  • Who all are liable for property tax exemptions in India?
    Mosques, convents, parsonages, churches, charitable institutions, and all landing or buildings, and other property used for education, religious purposes are exempted from paying property taxes in India.0
  • Is local property tax to be paid every year?
    Yes, local property tax has to be paid annually. If you are holding a residential property, then you are liable to pay Local Property Tax (LPT) on every 1 November.