Property Tax: All You Need to Know

Taxes are the primary source of income for a government. Taxes are levied by the government on citizens in various ways. Property Tax is one amongst the varied types of taxes applicable. Every property is an asset which is taxable.  Property tax is a real estate tax, calculated by a local government, which is paid by the owner of the property.

The word “property” in this context refers to all the actual real estate under the ownership of an individual and includes houses, office buildings and premises rented to third parties. Property tax, as a concept has been around for centuries and is acknowledged across the globe, with records of farmers and peasants too paying tax on their properties even in the middle ages.

The property tax is usually based on the value of the owned property, including land and the property tax is an annual amount paid by a property/land owner to the government. The property tax could be paid either to the local state government or Municipal Corporation, depending on government policies.

In India, property is classified into four categories, which help the government estimate tax based on certain criteria. The different property divisions in the country are as below.

  • Land – in its most basic form, without any construction or improvement.
  • Improvements made to land – this includes immovable manmade creations like buildings and godowns.
  • Personal property – This includes movable man-made objects like cranes, cars or buses.
  • Intangible property

 

Generally in India, property taxes are collected under Section 24 which is titled as “Deductions from income from house property”. ‘Income from house property’ is applicable in the following cases:

  • If you are renting out a single house or multiple houses, then the rent received will be considered as part of your income.
  • If you have more than 1 house, then the Net Annual Value of the houses, except the house you are living in, will be considered as your income.
  • If you own only 1 house and you are living in it, the income from house property will be considered as NIL. Any income derived from rent and annual value of additional houses, will be subject to tax after deductions made under Section 24.

 

Property taxes are taxes that are usually assessed locally by municipalities to raise operating revenue for the city or town. For the benefit of our readers, given below are the steps to follow while calculating property tax.

 

  • Find the assessed value of the property being taxed.
  • Add the value of land and improvements to get the total value
  • Find the current local government’s tax rate
  • Find the property tax rates for other local agencies
  • Add all the taxes
  • Multiply the figure arrived at with your property value. The resulting figure is the amount you would have to pay as property tax.

 

With digitization changing the course of the world, every activity is going towards the process of atomization. Paying property tax was considered a huge challenge in the past, but those days are long gone, thanks to the option of paying property tax online. Most municipal corporations provide the option of paying property tax online, streamlining the process and saving valuable time. For the benefit of our readers, below detailed are the steps to be followed to pay property tax online. However, these are basic steps which could vary with the processes adopted by different states.

 

  • Log onto the official website of the particular area’s municipality/city corporation.
  • Select the option, ‘property tax’ and navigate to the ‘payment’ option.
  • Choose the right form (either 4 or 5), based on the category under which an individual’s property falls. These forms are used to determine if any changes have been made to a property in question.
  • Choose the assessment year. This is the year for which property tax needs to be calculated and paid.
  • Individuals will then be required to fill in their property identification number and any other relevant documents pertaining to their property (zone under which it falls, property type, etc.) including the owner’s name.
  • Once all relevant information has been entered, individuals can choose the mode of payment, which could be credit/debit cards or internet banking.
  • Once payment is made individuals can take a print out of the challan for their reference.

 

Property Tax – Frequently Asked Questions

 

Q.Is property tax decided by the central government?

A.No. Property tax is determined by your local administration – that is, urban local bodies such as Municipal Corporation and similar organisations.

  1. Does a tenant have to pay property tax?

A.No. in India, only the house owner has to pay the tax.

Q.Is there any way I can get exemption from property tax?

A.You may get a property tax exemption based on your age (if you are the senior most  citizen, for example), net income of the individual, type of property, location of property (if it is located in a famine zone or such affected regions), history of public service or value of the taxable property. If you have a vacant plot of land, you don’t have to pay property tax on it. You need to check with your local administration for the details.

  1. Why is my property tax assessment higher than the value of my property?
  2. Either you are not aware of the market value of your property, or your assessment is wrong. It is best to approach your local administration and clarify.
  3. Can I make property tax payments online?
  4. You can pay your property tax online subject to the facility being available in your local jurisdictional municipal authority. Bengaluru, for example, has recently started allowing property tax payments online.
  5. Q. Does late payment of property tax attract any penalty?
  6. Late payments towards property tax can attract a fine, generally equivalent to a certain percentage of the amount due. However, the amount varies from state to state,