Property tax is a mandatory annual tax paid by a land-owner to the government-mandated local body or the Municipal Corporation. It is based on the total value of the property. The rate of this tax as well as the manner of valuation usually varies between municipal authorities across the country.
These taxes are collected on all tangible real estate properties, including –
However, this municipal tax is not levied on vacant plots that have no adjoining buildings.
Property or house tax is mandatory for owners to pay by and before the mentioned due date.
The taxable amount is calculated by municipal authorities based on the assessed value of a particular property. There are primarily 3 methods that are used to calculate these taxes.
Several municipalities have introduced online portals to help taxpayers pay property tax online. It aids in timely tax payments, helping a property owner maintain seamless and easy- access to records that are used while calculating details like income tax on sale of land and tax on rental income. Timely tax payment also helps in case of applications for secured loans. Borrowers can enjoy loan against property tax benefits of up to Rs. 2 lakh if the funds are utilised in accordance with the end usage criteria suggested in Section 24(B).
The types of property on which an owner has to pay this tax include –
It should be noted here that property tax is not applicable on an empty plot. Only a constructed building will attract the same.
Interest on property tax is charged when you fail to pay it in due time. Usually, the rate varies between 5% and 20%. Some states also don’t charge any additional late payment fee.
For example –
The net asset value (NAV) of a house can be calculated by deducting property tax from gross asset value (GAV).
GAV is any of the following -
Property owners will undergo a loss in case their house is –
In such cases, owners will be able to set-off their loss against any of the following 5 sources of incomes –
Loss from house property can be deducted against these incomes during the same fiscal year. Such losses will be carried forward to next fiscal if not deducted during this period. The net income thus availed will be taxable under the respective tax slabs.
As Finance Act, 2017, a maximum of Rs.2 lakh can be set-off during a fiscal year. The balance can be carried forward to the next year.
Income tax deductions on house property are subject to the following conditions -
No tax deductions will be applicable if the house you own is self-occupied. In such cases, tax exemptions will be subject to Section 24.
Section 24 of the Income Tax Act titled “Deductions from income from house property” allows these exemptions –
This deduction will be subjected to Rs.30,000 if the purchase or acquisition is not completed with the said period.
Exceptions under Section 24 is subject to the following cases as per Section 23, sub-section (2), where the house is –
There will be no ceiling for deductions if the property is not self-occupied.
b. Cannot be occupied by the owner owing to his/her business, occupation, or employment, which is carried out at any other place.
The deductions will be limited to Rs.2 lakh if the house is not self-occupied for these reasons.
Section 80C offers deductions for stamp duty, registration charges, and principal repayment of borrowed capital. Such exemptions have a ceiling of Rs.1.5 lakh.
Deductions on the borrower capital principal can be claimed every year as long as it is foreclosed or fully repaid. Stamp duty and registration charges deductions will be only applicable once in the same financial year when the same are paid.
Bruhat Bengaluru Mahanagara Palike or BBMP property tax is calculated based on a Unit Area Value system. The system calculates the tax basis the expected returns from a house property.
The calculation process is depended on per sq. ft. per month for a specific location multiplied by the rate.
BBMP classifies its serviceable areas into 6 zones – A to F. The property tax rate depends on these respective zones.
The tax rates for a tenanted property at zone A is Rs. 5 per sq. ft., while for a self-occupied one, it is Rs. 2.5 per sq. ft. On the other hand, a tenanted property in zone F is Rs. 2 per sq. ft., while for a self-occupied one, it is Rs. 1 per sq. ft.
The New Delhi Municipal Council (NDMC) charges property tax basis on the following slabs –
The NDMC collects property tax from 13,500 private and government properties. It also collects service charges from government establishments constructed after 26th January 1950.
Property tax of NDMC is the rate determined under Section 61 of the NDMC Act multiplied by the relatable value of the building and land determined under Section 63 of the Act and NDMC Bye-Laws.
The East Delhi Municipal Corporation (EDMC) also calculates property tax based on the Unit Area Value system. It has 7 colony categories for its 20 types of properties. Property tax rate for EDMC ranges from 10% to 20%.
The following individuals receive a 30% rebate on property taxes –
A 20% rebate is offered to group housing flats if the tax is paid within 30th June of every financial year.
The rebate is subject to several conditions, one being that it is applicable for only 200 sq. m of total area or built-up area except for CGHS or DDA housing residential units.
All of the respective municipal corporations have their dedicated websites through which owners can pay their property tax. Some of the state governments also have a dedicated portal to pay property tax of respective municipal councils.