What is Property tax? How much do I have to pay?

Property Tax Nov 21, 2022

What is property tax?

Property tax is levied on real estate. The process to calculate property tax can be easily navigated through if certain aspects are kept in mind. The rate of property tax and the way the valuation is calculated tends to vary from one municipal authority to another.  

Also called ‘house tax’, property tax is imposed by authorities like the panchayat, municipality or municipal corporations. This tax is used for maintaining local civic amenities and for the upkeep of roads, sewage system, lighting, parks etc. Property tax is imposed on all real estate (residential and commercial) along with any/all attached land and improvements made to it, office buildings, premises rented out to third parties etc.

How to pay your property tax?

One can pay the property tax either directly at the Municipal corporation (MC) in your area or at designated banks that are affiliated to the MC. You will be needed to provide certain details like property tax number/ Khata number (to identify your property). Thankfully, most municipal taxes can be paid online now via corresponding websites.

Certain exemptions are given from payment of property tax based on location, age, net income, type of property etc. It becomes very important to assess the type of property you have and verify with the local administration as to the limit of your tax liability.

How to calculate property tax?

Property tax is calculated by municipal authorities by evaluating the assessed value of the property. There are three main ways of calculating property tax:

  1. Unit Area Value System (UAS): In this, tax is levied on the per unit price of the built-up area of the property. It is a fixed price, per square foot per month), and is based on the expected returns of the property, as per its - location, land price, usage etc. It is then multiplied with its built-up area. Certain municipalities like Delhi, Kolkata, Bengaluru, Patna and Hyderabad apply this system.
  2. Annual Rental Value System or Rateable Value System (RVS): In this type of system, the tax is calculated on the yearly rental value of the property. This is not the actual rent that is collected, rather the rental value decided by the MC based on size, location, condition of property, proximity to landmarks, amenities etc. Hyderabad and Chennai are two examples of municipalities that follow this system.
  3. Capital Value System (CVS): the location of the property is used to determine the market value of the property. The tax is then levied as a percentage of that market value. Mumbai follows this system. The market value is also revised and published yearly.

When do you pay property tax and who pays it?

House tax is paid annually and late payment may at times attract a fine by the way of an interest on the amount due, this can go up to 2% per month as well. The onus of payment of property tax falls on the owner and not on the occupant.

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