Property Tax Guide: Calculation, Payment Method And Importance
If you own a property in your name, there are a slew of taxes that have to be paid by you. One of such taxes is property tax which a homeowner needs to pay annually to the local civic authorities or state government, depending upon the legislation. Though owning a property in India is considered to be the safest and secured investment, property tax component is one of the major sources of revenue of the civic bodies which is used in city management and maintenance.
What is Property Tax?
The term 'property' in property tax is referred to real estate assets which are tangible and are owned by any person. This can be a residential property, commercial property or space which has been rented out to some other person. The owner of the property has to pay a certain amount of monetary duty to the local government, calculated on the basis of the formula, notified by the state authorities. Since every property is an asset, it is liable to be taxed annually which has to be paid to the government and a receipt should be acquired which also helps in proving the due diligence of your property, if at later stages you consider it for selling.
The property tax has been a vital part of Indian taxation system, no city or village is exempted from paying it. Farmers, peasants, and landowners in remote villages are also liable to pay this amount to the local authority, in absence of which a penalty is imposed and also be confiscated if the owner kept defaulting over a long period of time.
Earlier, in the absence of technology, registers and files with handwritten entries were compiled to keep records of property tax payment. Now, the entire process has been moved online in cities and towns while few villages still rely on the manually recorded details in registers.
Calculation of property tax
Since property tax is the subject of state, there is no universal formula for calculating the property tax. Usually, the formula for evaluating the tax remains same across the state; civic authorities can alter the components to be assumed in the formula.
Property Tax in Mumbai
While calculating property tax in Mumbai, assessment is carried out on location of the property, the occupancy status- self-occupied or rented out, type of property- residential or commercial or land, types of amenities provided, construction age, type of construction- multi-storey, single floor or kutcha house, Floor Space Index (FSI) and carpet area. Considering the above components, civic agencies use a different formula to derive the tax liability.
Here's the formula used by Brihanmumbai Municipal Corporation-
Property tax = base value × built-up area × Age factor × type of building × category of use × floor factor
Property Tax in Delhi
To make things simple, the Municipal Corporation of Delhi has developed an online calculator to evaluate property tax on the basis of the type of location, type of construction and amenities available around. It also factors in the annual value of the property which is derived through following formula-
Annual Value = Covered Area x Unit Area Value x Age Factor x Use Factor x Structure Factor x Occupancy Factor
Delhi government offers a rebate to certain classes of citizens. This includes senior citizens, women, physically challenged, ex-serviceman, group housing flat owners, CGHS Flat owners. The rebate is as high as 30 per cent of the property tax.
You can calculate your property tax in Delhi here.
Property Tax in Bengaluru
There are eight steps to calculate property tax to be paid in Bengaluru:
- Calculate built up area of the property, cost per unit area and the depreciation that is applicable
- Multiply cost per unit area with the total built-up area and multiply the sum with 10
- Deduct the depreciation from the value you calculated in step two. This is the annual value of the property
- Calculate 20 per cent of the annual value of the property. This is the property tax sum
- Calculate 24 per cent of the property tax sum. This is the cess
- Add the property tax and cess to arrive at payable tax sum
- You can enjoy five per cent rebate if you are paying the property tax before the due date of April 30
- Deduct five per cent of the payable tax sum to get actual property tax
There are six different kinds of property tax forms available at Bruhat Bengaluru Mahanagar Palika. Each one of these deals with the details provided by the owner of the property. Taxpayers should note that payment of up to Rs 1,000 can be paid in cash. For higher amount, credit/debit card or demand draft should be drawn in the favour of BBMP.
Property tax in Chennai
To calculate property tax in Chennai, estimate the annual rental value of the property by multiplying the plinth area of the property with the base price of the locality and further multiply it with 10.92, the common factor. The annual value so arrived is classified into four categories are liable to be taxed on half-yearly basis as given below-
Half Yearly Tax (% of Annual Value)
Rs 1 -500
6.62 per cent
Rs 500- 1,000
9.92 per cent
11.02 per cent
Rs 5,000 and above
12.40 per cent
Which type of property is liable to be taxed?
Property tax is applicable on all types of property- residential, commercial as well as land. The owner needs to pay property tax even if the space is rented out to the third party. The tax applicable to the commercial property is marginally more than the housing assets as the cost of renting is more. The formula for computing the property tax is same. However, few civic authorities charge more for commercial properties which are located in prime localities.
How to pay property tax?
Though earlier the owner has to visit the state revenue office for paying the dues, things have become easier as all leading civic authorities have started online channels to collect the taxes. Here are simple steps to pay your property tax online-
- Log in to the official website of your civic authority
- Click on property tax tab
- Choose the type of property, assessment year
- Fill in the information related to your property like address, street, property identification number etc. These are crucial to estimating the net property tax to be paid
- Choose the mode of payment- net banking, credit/debit card
- Once paid, print the online receipt and keep it safe for future references
- Other alternate channels for paying property taxes are through banks authorised by the municipal body which can issue challan, once you pay the tax. You can also visit the property tax office in-person if you are not comfortable relying on online payment gateway.
Penalty of not paying property tax
Non-payment of property tax can invite huge penalty in the name of the property owner. This penalty amount varies from state to state. Though most of the times states negotiate with the property holder so that more people clear their dues on time. Usually, late payments towards property tax can invite the interest of 5 to 20 per cent on the payable sum, depending upon the policies.