Property Tax in India- Your Ready-Reckoner
We all take pride in property ownership, property in our name. But did you know that other than the purchase price/stamp duty you pay for that real estate investment, it is not the only expense you incur? There are certain charges that need to be paid to the Govt., annually; one of those is property tax.
What is Property Tax?
Property tax is also known as house tax sometimes. Property tax is the amount that is paid by the landowner to the municipal corporation or the local government for his/her area. These real estate taxes have to be paid annually. In India, property tax is levied on all real estate; thee include improvements made to land, such as buildings or land attached to buildings. However, vacant lands without any adjoining construction are exempted from property tax.
Importance of Property Tax
When you pay property tax to your local municipal body, they get funds. These property tax bills support and facilitate the govt. bodies in providing certain important benefits to the society, like cleanliness in the area, water supply, and maintenance of local roads, drainage, and other civic facilities.
How to Calculate Property Tax?
Different municipal corporations adopt different systems and make property tax calculations accordingly. There are 3 defined systems they may adopt.
- Annual Rental Value System
Here the amount of tax payable is based on the annual ‘rentability’ of a property as fixed by the municipal body. So, it is not the actual rent collected on the property, but rather gross annual rent that can be expected if the property is let out. This system is being followed by the municipal corporations of Chennai and Hyderabad.
- Capital Value-based System
This system uses the market value of the property as the basis on which property tax is levied. The govt. determines the market value of different properties which may be revised annually. The Brihan Mumbai Municipal Corporation has switched to this system.
- Unit Area Value System
Here, the system fixes the price per unit value of the built-up area or carpet area of the property on which the expected returns from the property are calculated. This system is applied in New Delhi, Bangalore, Kolkata, Hyderabad, Patna, and Ahmadabad, etc.
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Property tax in Pune
The Pune Municipal Corporation (PMC) and PCMC, offer an online property tax calculator, in which you can enter the following details and ascertain the amount of tax you need to pay on your property: Location, Area, Usage, Type, Total plinth area, Construction year and so on.
The property tax or house tax may be paid online on the respective state government or municipal authority websites. Earlier this was a manual process and quite cumbersome. With online payments, all that is required is the ‘property tax number’ or Property ID No. or the ‘Khatha number’ for which the payment is to be done. With your chosen mode of online payment, a tax deduction would be done. Property tax can also be paid offline at the offices of the municipal corporations or designated banks in partnership with the authorities.
Late payment of taxes attracts a penalty and interest based on the amount due. For non-payment, the authorities may take legal recourse too. If you do not pay property tax, then, the municipal body may refuse to provide water connection or other services.
Exemptions on property tax
Certain types of property owners get exemptions & rebates on their overall property tax liability. Across states, properties that belong to religious organizations or governments are not liable to pay any property tax.
An exemption is typically provided to Senior citizens, people with disabilities, former army, navy, or any other personnel employed by defense services, Families of martyrs from the Indian Army, BSF, police service, CRPF and fire brigade, educational institutes, agricultural properties.
That was all about property taxation in India. However, an important fact to remember is that the liability of paying the tax rests on the owner of the property and not on the occupier (tenant). The rules for obtaining property tax are different from one state to another and one city to another. So for all your queries on property taxes, you can refer to this handy guide.