A Complete Guide to Property Tax

December 03, 2024

Apply Now

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

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.
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.
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.

Final Thoughts

Paying property tax timely is an essential responsibility for homeowners. By understanding how property tax is calculated and knowing the various methods used by municipalities, you can navigate this aspect of homeownership with ease.

Buying a house has never been this easy! Avail Ujjivan SFB’s wide range of affordable home loan products and enjoy a hassle-free loan journey. From house purchase loan to plot loans and home improvement loans, we have it all! Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.

Apply Now

FAQs

1. How often do I need to pay property tax?

Property tax needs to be paid annually. The due date for payment may vary based on your municipality's regulations.

2. Can I pay my property tax online?

Yes, many municipal authorities offer online payment options on their websites. This allows you to conveniently pay your property tax from the comfort of your home.

3. How can I calculate my property's market value for tax purposes?

Property valuation is determined by the local administration or government based on factors like location and prevailing rates in the area. You can consult a property valuator to get an estimate of the market value.

4. Can I appeal if I disagree with the assessed value of my property?

Yes, you can appeal against the assessed value of your property if you believe it has been incorrectly calculated. Contact your local municipal authority or tax department for the appeal process.

5. Can I claim deductions on my property tax?

Currently, there are no specific deductions available for property tax in India. However, you may be able to save on taxes through other means, such as claiming deductions on home loan interest under Section 24(b) of the Income Tax Act.

6. Can I prepay my property tax for multiple years?

Typically, property taxes are collected annually. However, some municipalities may allow prepayment for multiple years. Check with your local authority for more information.

7. What happens if I fail to pay my property tax on time?

Late payment of property tax can attract interest charges. The interest rate may vary depending on your municipality's policies. It's advisable to pay your property tax on time to avoid any additional charges.

8. How can I save on property taxes?

While property taxes are mandatory, there are ways to potentially save on taxes. For example, you can explore tax-saving investments like investing in a residential property under Section 80C of the Income Tax Act.

9. Can non-residential properties also be taxed?

Yes, non-residential properties such as commercial buildings and land are also subject to property tax. The calculation method may vary based on the type and use of the property.

Disclaimer