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Explain Property Tax In Detail

​Property tax is levied by the Local municipal authorities for the maintenance of essential civic services and amenities in the city like roads, parks, sewer system, and other infrastructure facilities like lighting, etc. The property owners pay the tax either on a semi-annual or an annual basis. Property tax is different for different states, cities, and zones of the same town. Also, it is the principal source of revenue in urban local bodies in almost every part of the world.

How Property Tax is Different from Income Tax

Property Tax and Income Tax are entirely different from each other. Property Tax is levied by the local authorities like Municipality/Municipal Corporation/Panchayat whereas the Central Government collects income Tax. Also, the method of calculation of both the taxes is quite different from each other. Moreover, Property Tax differs across states, whereas Income Tax is the same for each state; instead, it is calculated on the income a person is earning.

On which kind of property is property tax levied?

In India, property tax is imposed on real estate, which consists of buildings and lands attached to the premises. Usually, vacant plots of land without any adjacent building do not attract property tax. The type of properties those are likely to be taxed under property tax in India is- Residential house (self-occupied or let out), office building, godowns, flats, factory building, shops, etc.

How to Pay Property Tax?

You can pay the property tax online in most of the states. You can even use the offline methods like paying at the municipal office or paying at select banks as identified by your municipal authority. You will attract fine if you make a late payment towards property tax. The fine is generally equivalent to a certain percentage of the amount due.

How is Property Tax Calculated?

Listed below are three main ways in which Property Tax can be calculated-

Capital Value System or CVS: under this tax calculation system, the market value of the property is used to estimate the taxes to be paid. The market value of a property is determined by the local government and revised annually based on the ward in which it is located.

Annual Rental Value or Rate-able Value or ARV: This system bases the amount of tax levied on the gross annual rent of the property as fixed by the municipal body. The municipal corporations of Chennai and Hyderabad follow this system.

Unit Area System or UAS: This system bases the amount of tax levied on the price per unit value of the built-up area or carpet area of the property. Cities like New Delhi, Bangalore, Kolkata, Patna, and Ahmadabad follow this system. Generally, you need to ascertain the value of property fixed for your zone and multiply it with the carpet area of your house.

Some municipal corporations provide certain exemptions from payment of property tax based on factors such as age, location, net income of the individual, type of property, etc. It is best to thoroughly check with the local administration for such details and evaluate the value of the property with caution.

Also, consider insuring your house with a comprehensive home insurance policy. A home insurance policy covers your home against unfortunate circumstances like a flood, fire, natural calamities, etc.