A Complete Guide to Property Tax

Property tax, also known as house tax, is levied by municipal authorities in India on real estate properties. It is used for maintaining and improving the local civic amenities such as roads, parks, sewage systems, and lighting. Whether you own a residential or commercial property, it's important to know how to calculate and pay your property tax.

In this guide, we will break down nuances of property tax payment, including calculating property tax, different methods used by municipalities, and discuss the importance of timely payments for maximum tax savings. 

How to Calculate Property Tax Payment

Property Tax = Base Value x Built-Up Area x Age Factor x Category of Use x Type of Building x Floor Factor

While this formula gives a general idea of how property tax is calculated, it's important to note that each municipality may have its own specific method. 

Common Methods for Property Tax Payment in India

1. Capital Value System (CVS)

   Under the Capital Value System (CVS), property tax is based on property valuation, and calculated as a percentage of the property's total market value. The market value is determined by the local administration, such as the municipal body or government, based on the locality.

    

2. Unit Area Value System (UAS)

   The Unit Area Value System (UAS) calculates property tax based on the per-unit price of the built-up area. The price per unit is determined by factors such as location, land price, and usage. This value is then multiplied by the total built-up area of the property to calculate the property tax amount.

    

3. Annual Rental Value System or Ratable Value System (RVS)

   The Annual Rental Value System or Ratable Value System (RVS) assesses property tax based on the annual rental value of the property. This does not necessarily mean the actual rent being collected, but rather a rental value determined by the municipality. The value is calculated based on factors like location, size, and the condition of the property.

How to Make Property Tax Payments

You can pay your property tax at your local municipal corporation office or designated banks affiliated with the corporation. Many municipal authorities also provide online payment options on their websites, making it convenient for property owners to pay their taxes.

To pay your property tax, you may need to provide your property tax number or Khatha Number for identification purposes. It's important to note that the responsibility of paying property tax lies with the owner of the property and not the occupant.

Late Payment and Interest Rates

It's crucial to pay your property tax on time to avoid any penalties or additional charges. Late payment can attract interest charges ranging from 5% to 20%, depending on state or municipality policies. These charges are added on top of the principal amount of the property tax. Ensure timely payments for maximum tax savings on your property.