Property Tax in India

With real estate generating handsome returns and rentals reaching record high in metropolitan and most of the tier II cities, investment in property is something everyone has been seeking. A property of your own is an investment that gives returns in form of appreciation in value and rentals. In India, if you have taken loan to buy a residential property then you can save Income tax too! However, owning properties attracts property tax that is levied by the government on value of properties that a person owns.

What is Covered Under Property?

Property in India is broadly categorized into land, improvements made to land, personal property and intangible property. Property in case of property tax only includes physical or tangible assets thus covering residential structures, office buildings or any premises rented out. Property tax is levied by local authorities and they execute the responsibility of assessing the value of properties falling in their jurisdiction and then imposing the tax on the value. The house owner is liable to pay the property tax not the occupant. There are certain exemptions available but they also differ from one municipal corporation to other this is why it is advisable to check the rules of your local authority.

Computation of Property Tax

It is important to remember that it is not the price at which the property is transacted but the fair value assessed by municipality on which property tax is to be paid. Value of property is assessed considering location, status like whether it is rented or self-occupied, type of property (residential or commercial), type of construction, age of structure, amenities provided and area covered by the property. Even though the basics of computation and factors remain same, every municipality uses its own unique formula to arrive at the value of the property.

Rate and Payment of Property Tax

Property Tax is to be paid as per the guidelines of the local municipal corporation. Presently it can be paid annually or semi annually. It can be paid online these days with states and municipalities having their own websites where online payment can be done. If the property tax is being paid in two installments then same form has to be filled for the second payment as was used for first. If a tax payer is making payment in one installment then he gets to avail a rebate of 5%. In case a tax payer has defaulted then the system will add the default amount plus an interest of 2% per month to the total due. Property tax can be paid through cheque and DD as well. If it is paid by cash, then receipt would be generated immediately. The property tax has varying rates from state to state and municipality to municipality.

How to Make Online Payment of Property Tax

Since all municipalities have their own websites, the procedure may change slightly. But across the board, it almost adheres to the following steps.

  • Step 1: Register and create a login on your local municipal corporation’s website.
  • Step 2: Click on property tax and choose the payment option
  • Step 3: Fill the form applicable to you with details requested
  • Step 4: Select the assessment year, property identification number and owner’s name.
  • Step 5: After filling in all details, choose the option of payment through internet banking, credit card or debit card.
  • Step 6: Take the printout of confirmation also known as challan as evidence of payment.

Other Property Related Taxes

As we mentioned in the introductory paragraph that buying home on loan can bring various tax benefits for the buyer, let us give you a brief on the same here. Individuals buying new house can avail deduction under section 80(C) of the Income Tax Act subject to maximum of Rs. 150,000 and includes stamp duty and registration. Section 24 of Income Tax Act allows Rs. 2 lakh on account of repayment of home loan interest in case of self occupied property. For rented property, entire amount of interest is allowed.

Capital gains tax is again a tax that is derived by selling off the property. Capital gains are taxed separately and have their own distinct rate that is charged on the profit. In case of long term capital gains, the assessee can use indexation which is valuing the property to present rates. This rate is then used as cost and excess of price recovered over this derived cost is then charged to tax. If a tax payer buys a new house out of the proceeds of the old, the gains are exempted from tax. But such house or property should be bought within 2 years of the sale.

So this was our comprehensive guide on property taxes and we hope you found it to be useful. For filing your tax returns do visit letzbank as we have tie up with Clear Tax, a very popular platform for filing returns in India. Clear guidance, concise information, easy navigation and availability of experts make it a convenient and very reliable platform for one and all. So visit us and file your returns today!