Property tax levied on the ownership of property is a substantial source of revenue for city-level municipal governments in India. The word ‘property’ in this context stands for all tangible assets under the ownership of an individual. Therefore, this umbrella term includes all properties – from self-owned residential spaces to commercial premises rented out to third parties.
For the ease of property tax calculation and estimation, the Indian government classifies property into four categories-
In India, owners of real estate properties are subject to pay a property tax. It is an annual charge levied by the Government of India on property owners. This tax is collected by the local government or the Municipal Corporation, whoever is authorised to do so in a given state.
Here, the term ‘property’ refers to land and improvements made to the same.
The government appraises the value of such properties and assesses the tax in proportion to its value. The Municipality of a particular area carries the responsibility of conducting this assessment and determines the tax payable by a property owner.
Property tax can be paid on an annual or semi-annual basis. This tax varies with each location, city and state.
Although the property tax is not unified across the country, the general guideline for its calculation is based on a mathematical formula. This formula is as below –
Property Tax = Base value x Type of building x Age factor x Floor factor x Category of use x Built-up area
Various civic corporations use different methods to calculate property tax. However, the general overview of these calculations remains the same.
A property is assessed based on the following factors:
Premised on these factors, a civic agency uses a formula it deems suitable.
Municipal authorities use one of the following three methods for property tax calculation:
This system calculates taxes on the basis of a property’s per-unit price of its built-up area. The price is evaluated based on the expected returns of the property as per its usage, location, and land price. This value is then multiplied by the built-up area, which gives its ultimate tax valuation. Several municipal authorities in India, such as Delhi, Hyderabad, Bengaluru, Patna, and Kolkata, follow this method.
Under this system, property tax is derived as a percentage of the market value of a property. The government decides this market value based on the locality of a given property. This valuation system is followed in Mumbai.
As per this system, tax is calculated on the rental value of a property. This valuation is based on the location, size, and condition of a property. It also takes into account the property’s proximity to landmarks and other relevant amenities. Chennai and parts of Hyderabad use this system to determine property tax.
The calculation of house property tax can be somewhat complex. However, a simplified elaboration of it is as given below:
An individual can pay property tax online by following the steps mentioned below:
Knowing your tax application number is essential if you choose to pay your property taxes online.
Follow the procedures below to find out your new application number online.
There are two kinds of deductions under Section 24 – standard deduction and deduction on interest against a home loan. These are discussed below:
This deduction under Section 80C is available for homeowners possessing only one house property on the date of sanction of a loan.
Here, the value of this home loan availed should be less than Rs. 35,00,000, whereas the value of this property must be less than Rs. 50,00,000.
No, property taxes paid on self-occupied property cannot be deducted from home property income.
No, there is no limit to the amount of property tax that can be deducted.
Yes, you can claim the benefit of property tax paid on the day of payment, and there are no restrictions on which year the property tax is tied to.
Both owners are required to pay a portion of the property tax based on their respective part of the property.
Any property used for religious worship, public burial, cremation, or heritage lands is excluded from the tax. Any structure utilised for charitable, educational, or agricultural purposes is likewise free from property tax.