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View postsInvesting in a property will be the biggest investment in an individual’s lifetime and there is a lot of effort that is put into investing a property, in terms of finance. Owning a property in India comes with the responsibility of paying property taxes to the municipal corporation of different cities.
Property tax is not fixed throughout the country and it varies from one state to another or from one city to another. The property taxes are fixed by the municipal corporations of different cities. While investing in a property an individual needs to know the following terms which are related to property tax calculation and what they mean, before paying property tax to the municipal corporation of different cities.
This article gives you a complete property tax guide on the property tax calculator, how to calculate property tax, property tax calculation formula, the importance of property tax, and online payment of property tax.
Property tax is the tax that is paid by a landowner or a property owner to the municipal corporation of the local government. Property tax includes all touchable real estate properties such as an individual’s house, office building, and the property that is rented or let out.
In India, Property Tax is payable only on property that is ‘real’, that is, land with and without man-made constructions. The municipal corporation of a city evaluates different categories of properties of a city, to decide on property tax as per its value.
Properties are classified to help the municipal corporation categorize the process of evaluating taxes based on certain criteria. The 4 different types of property tax in India are-
The money which is collected from the property tax is very important for the government. The tax money is used to maintain and establish basic public amenities such as laying roads, installing sewer pipes, construction, and maintenance of parks, installing street lights, etc. Thus the payment of property tax is very important because the government heavily depends on the property tax to provide the citizens basic public and civic amenities.
The property tax is not fixed as a whole in India and it varies from different locations, cities, and states. Example- Property tax which is fixed by the Bruhat Bengaluru Mahanagara Palike in Bangalore will be different from the property tax which is fixed by the Greater Hyderabad Municipal Corporation. Hence, different tax collecting bodies such as municipal corporations have different ways to determine the property tax by using a property tax calculator.
There is a general guideline regarding the calculation of a property tax throughout the country and the method to calculate property tax is calculated by using the property tax calculator formula:
Property Tax = Base Value x Built-Up Area x Age Of The Property x Type Of Property x Category Of Usage x Floor Factor.
As per the capital value system, the property tax is calculated on the market value of the property that is decided by the municipal corporation based on where the property is located. A percentage of the market value is estimated as the property tax to be paid by the property owner.
The unit area value system determines the property tax on the grounds of the per-unit price of the built-up area across the property. The price of the property, in this case, is decided based on factors such as land price, usage of the property, and its location. As the price is estimated, it is multiplied by the built-up area covered on the property.
The annual rental value system is also known as the rateable value system. As per this method, the property tax is collected based on the rental value of the property that is collected each year. The rent is not the actual amount collected by the owner; it is the rent estimated by the municipal corporation based on the location and size of the property.
Apart from these, the distance of the property to the amenities and landmark places such as markets, malls, and transport stations like bus stops, railway stations, and airports is also a key factor in deciding the rent of the property.
Property tax can be paid on both offline payment methods and online payment methods, as per the convenience of the property owner. Below is how you can pay property tax using the two methods.
To pay your property tax offline, you need to go to the office of the municipal corporation of your city. Also, you can pay a property tax on the designated bank branches. Offline payments of the property tax can be made through cash, cards, and checks.
The online method of paying property tax has made it very easy for people to make their tax payments, irrespective of the time zone or location. Most of the municipal corporations in India provide this service, making the process hassle-free.
If you prefer paying your tax online, here are the steps you need to follow. These are the standard steps for online payment of Property Tax and may be different for certain city or town corporations.
The interest on property tax is charged when an individual fails to pay the property tax on time. A penalty charged on property tax is equal to a certain percentage of the amount of the taxes due. Also, the property tax charged from the property owner varies from one municipal corporation to another.
However, in general, the percentage of property tax ranges from 5% to 20%. At times, various states and municipal corporations tend to waive off the interest rate on property tax in certain situations.
Deductions from income on house property, as mentioned under Section 24, are applicable in the following circumstances –
If you own property in India, you will be eligible for two kinds of deductions under Section 24 of the Income Tax Act. They are:
An Individual looking to buy property must have clear knowledge that the property tax is not fixed as a whole in India and it varies from one city to another or from state to state. The municipal corporations of different cities fix the rate of property taxes. The methods used to fix the property tax are based on capital value, unit area value, and rental area value.
It is very important to pay the property tax since the Government is dependent on the tax money to maintain public usage facilities such as roads, sewage water pipes, parks, and street lamps.
Property tax in India is calculated using the property tax calculator formula,Property Tax = Base Value x Built-Up Area x Age Of The Property x Type Of Property x Category Of Usage x Floor Factor.
To pay your property tax online, you need to go to the official website of the municipal corporation of your city, town, or state and click the option ‘property tax’, and move to the payments option to pay.
The age factor in property tax takes into account the age of the building and provides for higher tax on new buildings and less tax on old buildings in line with the market value.
Senior citizens, people with physical disabilities, and employees of the defense and military sector are exempted to pay property tax.
Property tax is paid on an annual yearly basis in India and the property tax varies from one city to another.