In India, Property Tax is levied by the municipal authorities on real estate. It is based on the value of the property. The rate of property tax and manner of valuation varies from one municipal authority to the other.
What is Property Tax?
Property Tax, also sometimes known as House Tax, is the tax imposed on real estate owners by the municipal authorities like panchayat, municipality or municipal corporation. It is used for maintenance and upkeep of the local civic amenities of the area, like roads, sewage system, lighting, parks, and other infrastructure facilities. It is usually levied on all real estate, including buildings (residential or commercial), attached land, and improvements made to the land, but not on vacant plots of land with no adjoining building.
How to Calculate Property Tax?
Property tax is calculated by the municipal authorities in proportion tothe assessed value of the property.There are mainly three ways of calculating property tax:
- Capital Value System (CVS): The tax is levied as a percentage of the market value of the property. This market value is determined by the government and is based on the locality of the property. The market value is revised and published yearly. Mumbai follows this system.
- Annual Rental Value System or Rateable Value System (RVS):Under this system, the tax is calculated on the yearly rental value of the property. This is not necessarily the actual rent amount being collected; rather it is the rental value decided by the municipal authority based on the size, location, condition of the premises, proximity to landmarks, amenities etc. Examples of municipalities following this system of property tax include Hyderabad and Chennai.
- Unit Area Value System (UAS):In this system, the tax is levied on the per unit price of the built-up area of the property. This price is fixed (per square foot per month) based on the expected returns of the property as per its location, land price, and usage, and is then multiplied with its built-up area. Municipalities like Delhi, Kolkata, Bengaluru, Patna and Hyderabad follow this system for property tax calculation.
How to pay Property Tax?
You can pay your property tax at the municipal corporation (MC) office of your area, or sometimes at the designated banks in affiliation with the MC. You may need to provide the property tax number or Khatha Number to identify your property. These days, most municipal taxes in India can be paid online on the corresponding municipal authority websites, making it much more convenient for the property holder. Certain municipal authorities may offer some exemptions from payment of the property tax based on factors such as location, age, net income of the owner, type of property, etc. It is prudent to carefully verify with the local administration for such information and assess your tax liability carefully.
Property tax needs to be paid annually, and late payment can attract a fine in the form of interest on the amount due, which can be up to 2% per month. It is also important to note that the onus of paying property tax is with the owner, and not the occupant of the property.