Property tax is a charge levied by Municipal Corporations or local governing bodies on all tangible real estate assets in their jurisdiction. Here’s everything to know about property tax in India.
Municipal authorities in India levy Property Tax on real estate based on the property’s value. The property tax rate and valuation method differ from one municipal authority to the next.
Property taxes levied on property ownership are a significant source of revenue for city-level municipal governments in India. In this context, the term “property” refers to all tangible assets owned by an individual. As a result, this broad term encompasses all properties, from self-owned residential spaces to commercial spaces rented to third parties.
Understanding Property Tax
Property tax, also known as house tax, is a tax levied on real estate owners by municipal authorities such as panchayats, municipalities, or municipal corporations. It is used for the upkeep and maintenance of the area’s local civic amenities, such as roads, sewage systems, lighting, parks, and other infrastructure facilities. It is typically levied on all real estate, including buildings (residential or commercial), attached land, and land improvements, but not on vacant plots of land with no adjoining building.
Types of property
In India, properties broadly get classified into four major categories:
It is the most common type of property our country’s citizens own. So, here land refers to the core land without any construction or improvement.
It is the second type of category, which includes land improvements such as the construction of a building or godown.
It includes mobile properties such as automobiles, buses, cranes, and trucks.
Intangible property includes assets such as patents, trademarks, and royalties.
How is Property Tax Determined?
Property tax in India is calculated using a variety of factors. The method used to calculate this may differ from one municipality to the next, but the overall calculation will be the same.
First, the property is assessed by determining the following:
- The area in which it is located
- The various amenities provided
- The status of occupancy
- The type of property (residential, commercial, or land),
- The year and type of construction (multi-story/ single floor/ pukka or kutcha structure, etc.),
- The floor space index, and
- The carpeted square area of the property.
After determining all of these parameters, the government body determines the property tax using one of the following methods:
Annual Rental Value System
The tax is calculated using this method based on the property’s yearly rental value. This value does not have to be the rent collected from the property. The municipal authorities determine the rent valuation based on size, condition of the premises, location, amenities, etc. This method is used by the municipal governments of Hyderabad and Chennai, two major cities.
Capital Value System (CVS)
The Capital Value System calculates tax as a percentage of the property’s market value.
The government determines the property’s market value based on its location. This market value is published and revised annually, and it is the method used by Mumbai’s municipal corporation.
Unit Area Value System (UAS)
The tax is calculated using this method based on the per-unit price of the property’s built-up area. The property’s location, land value, and usage determine this price per unit. This figure is then multiplied by the built-up area to arrive at the final tax figure. Municipal authorities use this method in Kolkata, Delhi, Bengaluru, Patna, and Hyderabad.
How Do I Pay My Property Tax?
You can pay your property tax at your local municipal corporation (MC) office or, in some cases, at designated banks affiliated with the MC. To identify your property, you may be required to provide the property tax number or Khatha Number.
Most municipal taxes in India can now be paid online through municipal authority websites, making it much more convenient for property owners. Municipal governments may exempt landowners from paying property taxes based on location, age, owner’s net income, property type, etc. Confirming such information with the local administration and carefully assessing your tax liability is prudent.
Property tax must be paid annually, and late payments can result in a fine of up to 2% per month in interest on the amount owed. It is also important to note that the owner, not the occupant, is responsible for paying property taxes.
Online and Offline Payment of Property Tax
Local municipal offices accept such payments in person. In the office, look for the specific counter that takes property taxes. Don’t forget to save the property tax receipt for future reference.
Property tax online payment is becoming increasingly popular. However, each state has a slightly different tax collection procedure. As a result, check to see if your municipality accepts online tax payments before proceeding.
Knowing how to pay property tax online is preferable because the process is much simpler and faster.
Property Tax Payment Process Online
To ensure a smooth property tax online payment, follow the steps outlined below.
Step 1: Go to the Municipal website and log in with your basic information.
Step 2: Navigate to the Property Tax Payments tab and follow the on-screen instructions.
Step 3: Choose the appropriate property tax online application form and enter the property type, location, etc.
Step 4: Carefully enter the assessment year. Choose previous years in addition to current years to clear any debts.
Step 5: Include information such as the property identification number, Revenue Survey number, plot number, etc.
Step 6: Select a preferred payment method, such as credit cards or internet banking, to complete property tax online payment.
Check the property tax status after successful payment to ensure that all dues have been cleared.
How to Calculate House Property Income?
When calculating income from house property, keep the following points in mind:
- The net annual value of the residential property should be considered when calculating Income from House Property. This net annual value is calculated by deducting municipal taxes from the house’s yearly gross value.
- If the house is vacant during the fiscal year, the rent received for the time the house was occupied must be considered rather than the rent received for the entire year.
- Furthermore, if the house is vacant and the owner is paying property taxes, they can offset this loss against income from other sources during the same fiscal year. If a person cannot offset their loss in the same year, they can carry it forward for up to 8 years.
Where Can I Get a Tax Application Number?
You must know your tax application number to pay your property taxes online. Follow the steps below to find out your new application number online.
- Navigate to your municipality’s property tax page.
- Select “GIS-based New PID.”
- Find the link that says “To Know Your New PID, Click Here” near the bottom of the page.
- Enter the old application number and click the “Search” button.
- Choose a name and click “Fetch.”
- The information will be displayed on the screen. Look for inconsistencies in the details.
- To learn more, select “View your property in Map.”
- Locate the property using Google Maps.
- Details can be downloaded or saved.
At such times, make any necessary changes. For example, if you enter your name incorrectly in property tax, you can change it online.
How to Get an Online Receipt or Challan for Property Tax
It is mandatory to keep a copy of the receipt after paying property tax in India. Follow the steps to save it for later use.
- Go to the website of the Municipal Corporation.
- Use the OTP to sign in to your Citizen account.
- The property tax payment information will be displayed on the following page.
- Choose “Actions” from the far right of the row.
- You can download a receipt by clicking “tax paid details” and clicking “download receipt.”
- To finish the download, click “Download PDF.”
Furthermore, paying the property tax on time is essential to avoid penalty charges levied if the due date is missed.
How Does Property Tax Collection Help to Improve Public Services?
Municipal governments have established procedures for calculating and valuing property taxes and enforcement mechanisms for issues such as arrears, delays, late payments, and tax evasion. These collections are used to build, repair, and maintain roads and municipal or state government schools, buildings, hospitals, and sanitation.
The Indian Property Tax System is facing significant challenges due to numerous flaws. It includes a lack of tax coverage, an expanding range of exemptions, a lack of collection competence, and the difficulty of periodically revising the tax base.
People frequently complain about a lack of clarity regarding proper ownership and tenancy rights and difficulties implementing market-based valuation and rent control laws. As a result, it is critical to consult with a property lawyer before purchasing or renting a property to ensure that all past titles and taxes are taken care of.
In taxation, property refers to all tangible real estate owned by an individual, including a house, office building, and premises rented to third parties. Property tax / Building tax is a yearly payment made by the land/property owner to the local government or municipal corporation. The funds raised through this tax are used to maintain and improve public properties such as roads, sewage systems, parks, and government buildings.
What exactly is a property tax?
Property tax is the annual sum paid by a landowner to the local government or municipal corporation.
Do I need to pay the Property Taxes if I am a tenant?
In India, the house owner is responsible for paying the property tax.
How many times a year must one pay Property Tax?
Property tax is paid to municipal authorities annually by the property owner.
What types of residential property are taxable?
Income generated from house property is taxed under the Income Tax Act of 1961.
How much of your home's value is tax-free?
If a property's Gross Annual Value (GAV) is less than Rs 2.5 lakh, a person does not have to pay taxes on rental income. However, if a person's primary source of income is rent, they may be required to pay taxes.