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Property Tax

House Tax in India

Last Updated 21st Sep 2020

  • Property tax is a charge that the owners of real estate are bound to pay to the Government.
  • The tax is collected either by the local governing bodies or by the Municipal corporation of a State.
  • A property tax is charged on all kind of real estates, whether residential or commercial and whether self-owned or rented out.
  • A property tax can be paid both offline and online.
  • Late payments of property tax can attract interest charges.
INCOME TAX CALCULATOR

What is Property Tax?

A property tax is an annual charge that is charged by the Government from the property owners of different properties such as residential properties, office premises, which is either self-owned or rented out to other people. The property tax can be collected by either the local Government or the Municipal corporation, whoever is authorized to collect the same in a particular state. The property tax similar to all taxes is collected by the authorities to fund the developmental and infrastructural activities, such as roads, highways, sanitation, etc.

How Property Tax is Calculated?

A property tax is not unified across the whole nation, and thus, it varies across different locations, cities, and states. Thereby, different tax collecting bodies have varying ways to determine the property tax. However, a general guideline regarding the calculation of a property tax is based on the following formula:

Property tax=Base value*built up area*age of the property*type of property/building*category of usage*floor factor.

Thus, the factors such as the base value of the land; occupancy factors whether self-owned or rented; property type whether residential or commercial; the age of the property or the year of construction; construction type whether multi-floored or single floor etc. determine the property tax across different states and locations. Based on these factors, one can calculate the property tax he or she is bound to pay, using the property tax online calculators, that are available at the Municipal corporations’ online portal of the respected State.

In addition to these, a property tax is calculated through different methods. These are listed as follows:

  • Capital Value Systems: As per the capital value system, the property tax is calculated as per the market value of the property that is decided by the Government based on where the property is located. A percentage of the market value is estimated as the property tax to be paid by the property owner.
  • Unit Area Value System: Unit area value system determines the property tax on the grounds of the per-unit price of the built-up area across the property. The price of the property, in this case, is decided based on factors such as land price, usage of the property, and its location. As the price is estimated, it is multiplied by the built-up area covered on the property.
  • Annual Rental Value System: Annual rental value system is also called as the ratable value system. As per this method, the property tax is collected on the basis of the rental value of the property that is collected each year. The rent, in this case, is not the actual amount collected by the owner; indeed, it is the rent estimated by the municipal corporation on the basis of location and size of the property. Apart from these, the distance of the property to the amenities and landmark places is also a key factor in deciding the rent of the property.

Methods to Pay House Tax

A house tax or property tax can be paid both offline and online, as per the convenience of the property owner. A detailed description of this process is listed below:

Pay Property Tax Online

One can pay property tax online by following the below-mentioned steps:

  • Log in to the official portal of the municipal corporation of your city/state.
  • Choose the option ‘property tax’ and move to the payments option.
  • Further, fill in the right property tax form, that is the form 4 or form 5, based on property type and the category.
  • As you fill the form, choose the assessment year, that is the year for which the tax is to be calculated and paid.
  • Proceed further to fill the property identification number, property documents and other required information such as the owner name.
  • After filling all the required information, move further, by choosing the mode of payment, amongst the options provided such as debit/credit cards or net banking.
  • On successful payment, a challan is generated on the screen. Take the print out of the generated challan for future references.

Pay House Tax Offline

To submit your property tax offline, you are required to visit the office of the Municipal corporation of your city. Apart, one can pay a property tax on the designated bank branches. Offline payments of the property tax can be made through cash or cards.

What are the Types of Property?

The term ‘property’ is a broader concept that covers four types under it. The classification of property into four types is listed below:

  • Land: Land is the most popular kind of property owned by people in the country. However, the land, in this case, is the core land without any construction or improvement in it.
  • Improvements made to the land: Improvement made on the land is another kind of property that people own as per the real estate investment. This includes improvements on land such as the creation of buildings or godowns.
  • Personal property: Personal property includes movable man-made objects. This includes the ownerships of vehicles such as cranes, cars, trucks or buses.
  • Intangible property: Intangible property includes the ownership of ‘untouchable’ objects such as patents and royalties.

Property Tax Interest Rate

The interest on property tax is charged when the individual fails to pay his property tax on time. The fine charged on property tax is equal to a certain percentage of the amount of the taxes due. Also, the property tax charged from the property owner varies from one State to another. However, in general, the percentage of property tax ranges from 5% to 20%. At times, various states and Municipal corporations tend to waive off the interest rate on property tax in certain situations.

How to Calculate Income from House Property?

One can calculate income from house property based on the following points:

  • It must be kept in mind that only the net annual value of the residential property is considered for taxation. The net annual value is determined by deducting the municipal taxes from the gross annual value of the house.
  • In case the house is lying vacant for any financial year, then only the rent received for certain tenure is considered as income, and it is not computed for twelve months or the whole year.
  • In case a house is lying vacant, but the owner is still paying the property tax against it, then, this loan can be offset under the income received from other sources. In case one is unable to consider the same in the current fiscal year then this expense can be carried forward within the next eight years.

Income Tax Deduction on Property

One can avail Income tax deductions on the property, as per section 24 and section 80C of the income tax act. A detailed description of these is listed below:

Income Tax Exemption Types Under Section 24

Section 24 of the income tax act is called the ‘Deduction from income from house property’. The income, in this case, is earned as per three scenarios:

  • The rent received on renting the house is considered as income.
  • In case a person owns more than one house, then the net annual value of the unoccupied house is considered as the income.
  • In case a person owns only one house, and that is occupied by him, then the income will be considered as Nil. However, the rent earned on additional houses will be eligible for deductions under section 24 of the Income-tax act.

Based on these factors, one can avail exemptions on the income from property, as per section 24 of the income tax act. Section 24 provides two kinds of tax deductions, that is the standard deduction and the deduction on the interest on a home loan.

  • As per the standard deduction, a sum up to 30% of the net annual value does not fall under the tax limit. However, the standard deduction is not applicable is one occupies the only house he or she owns.
  • As per section 24 of the income tax act, if a person takes a home loan for a purchase, construction, or renovation of a house, then any interest paid on the principal amount is exempted from tax payment. As per this clause, if one takes a loan for a self-occupied property, then an exemption up to Rs 2 lakhs can be availed.
  • Also, if one claims a loan for the purchase or construction prior to the actual purchase or the construction phase, then the interest paid during this period can be paid in five equal instalments preceding from the year in which the property is purchased or when the construction is completed.
  • When one avails a loan for the renovation or the extension of a home loan, the tax exemption cannot be completed until the renovation is completed.
  • In case the house is occupied by an individual, one can claim a tax exemption on the whole interest that he or she is paying.
  • In case a person lives in a different city from where he owns his or her house and is living there in the rented property then tax exemptions on interest payments can be availed up to Rs. 2 lakhs only.

Tax Exemption Offered by Section 80C

Section 80C under the income tax act also provides tax exemptions to the property owner. These are listed as follows:

  • As per this clause, individuals who make a new home purchase can claim deduction under section 80C on the stamp duty and registration charges. A deduction of up to Rs. 1.5 Lakhs can be availed on these charges.
  • Apart, any other expenses undertaken during the transfer of a new residential property can claim exemption as per this clause.

About BBMP Property Tax

The BBMP property tax is the tax collected by the Bruhat Bengaluru Mahanagara Palike (BBMP) from property owners in the city of Bangalore. The BBMP collects the property tax annually and determines the value of the property tax based on the Unit Area Value system wherein the tax is calculated on the basis of the per-unit price of the built-up area across the property. Property owners can pay BBMP tax online by visiting the BBMP official website.

MCD Property Tax

MCD is the Municipal Corporation of Delhi that is the local governing body in the Capital of India. The MCD is authorized to collect tax from all kinds of property owners, whether owners of residential, commercial, or a vacant property. The tax collection as per the MCD guidelines is based on tax estimates derived through the Unit Area System. Property owners are obliged to pay tax to the MCD every year, through either the online or the offline method. The Municipal Corporation of Delhi is further divided into three zones. These are NDMC, EDMC and SDMC, which stand for North Delhi Municipal Corporation, East Delhi Municipal Corporation and South Delhi Municipal Corporation, respectively.

NDMC Property Tax

NDMC stands for North Delhi Municipal Corporation. The NDMC collects property tax from property owners and joint owners whose property is rented, sub-rented, occupied or non occupied. The NDMC charges property tax on using the Unit area value system. At times, the rent is also calculated on the annual rent value system, where the higher estimate as the annual rent value system or the unit area value system is considered. Payment of property tax to the NDMC can be made through cheque made in favour of the “Secretary, NDMC”, payable at New Delhi.

EDMC Property Tax

EDMC property tax is the tax collected by the property tax collection authority in East Delhi, that is the EDMC or the East Delhi Municipal Corporation. EDMC property tax can be paid online by visiting the official website of the MCD, that is the Municipal Corporation of Delhi. On the website, before making the payment, one is required to choose the area’s municipal authority, amongst the listed municipal authorities in the capital of India such as NDMC, EDMC or SDMC. Payments to the EDMC can be made through net banking, credit card or debit card.

SDMC Property Tax

SDMC that is the South Delhi Municipal Corporation is the tax collecting authority in the Southern zone of the capital area. The SDMC collects tax for the development and construction of civic amenities in the area under its supervision. Similar to the EDMC and the NDMC, the SDMC also calculates the property tax through the Unit area method. In addition, this tax collecting authority accepts payments for property tax through both net banking and cheques.

Property tax in Top Cities

FAQs

What is the property tax in India?

A property tax is a charge collected by the Government authorities by the property owners. The tax is collected by the authorities to fund the cost of improvements and establishments of public expenditures and amenities.

Is property tax and house tax the same?

Both property tax and house tax are taxes collected by the Government authorities from the property owners. However, a property tax is a broader concept that covers the tax collected on various types of real estate properties such as commercial, residential or institutional properties. A house tax, on the other hand, is specific to the tax collected from the owners of residential premises that is a house.

Who pays property tax in India?

The property tax is paid by the owners of the real estate properties, such as a land, house, or commercial premises.

How many times is the property tax paid?

A property tax is an annual charge paid by the property owner to the concerned authority. The amount of property tax that is to be paid by the property owners varies from one State to another and is also based on factors like location, unit area coverage, and type of property.

How do I figure out my property taxes?

A property tax differs across all states, and different municipal corporations can have different parameters to calculate the property tax. However, in general, a property tax is calculated based on the following method: Property tax=Base value*built up area*age of the property*type of property/building*category of usage*floor factor.


Our News - Sep 2020
  • 2020-08-27 : Maharashtra reduced stamp duty to boost real estate sector
    Maharashtra government has reduced the stamp duty on property registration by 3% for the period 1 September to 31 December 2020, and by 2% from January 2021 to March 2021. The step was taken to revive demand in the real estate sector.
  • 2020-07-13 : SDMC increased the duty on transfer of property
    South Delhi Municipal Corporation has increased the rate of duty on transfer of property from this financial year. The move is likely to make the sale and purchase of the property expensive.
  • 2019-06-14 : MCG announces 10% rebate on property tax payments to those who clear tax dues by July 31
    Municipal Corporation of Gurugram (MCG) has announced a 10% concession on property tax payments for all those who clear their dues for the financial year 2019-20 before July 31. The move taken by the civic body will help them to bring down the number of defaulters who don’t pay their taxes on time.
  • 2018-03-29 : Aadhaar-welfare schemes linking dealine extended by 3 months
    The deadline for linking of Aadhaar with welfare schemes has been extended to June 30, as per the recent developments by the government. The Central Board of Direct Taxes (CBDT) has extended the deadline for linking of Aadhaar with Permanent Account Number (PAN) from March 31, 2018, to June 30, 2018. The extension has come as an instruction by the Supreme Court, directing extension of the March 31 deadline for linking Aadhaar with various other services.
  • 2017-09-16 : Bank lending growth rate to housing sector lowers down due to RERA
    Bank lending to the housing segment has slowed down during the current FY18. The slowdown in the home loan growth rate is attributed to the lack of clarity in the policies of real estate regulation act and GST regulations.
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