What is property tax?
Property tax is an annual tax that must be paid by a landowner to the government-mandated local body or the Municipal Corporation. The tax applicable is based on the tax as well as the manner of valuation, which usually varies between municipal authorities across the country. There are primarily three methods that are used to calculate property tax.
- Unit area value system: Unit Area Value System, or UAS, is calculated based on the per-unit price of the built-up area of a particular property. The tax slab per square foot of built-up area is fixed depending on the expected market price of that property (calculated depending on the location, usage, and land price). Several municipalities utilise this method. Municipalities in Kolkata, Patna, Bengaluru, as well as EDMC property tax and NDMC property tax, follow this mode of calculation.
- Rateable value system: Rateable Value System or RVS calculates property tax based on the annual rental value of a particular property. The amount is decided by the municipal authority based on the size, location, condition of the property, amenities, etc. This system is followed by municipalities in Hyderabad and Chennai.
- Capital value system: Capital Value System is calculated based on the total market value of a property. This rate is revised and published every year, prevalent in multiple Tier-I cities such as Mumbai.
How to pay property tax online?
Some municipalities also allow you to pay property tax online. This provision can help save a lot of time and can make it easy to maintain records of payments as well. A benefit of timely tax payment is that it aids 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).
Property tax: Types of property
Property tax is collected on all tangible real estate properties, which include the following:
- Residential and commercial buildings
- Attached lands
- Rented houses
However, this municipal tax is not levied on vacant plots that have no adjoining buildings as it is only applicable to constructed buildings.
Property Tax in Other Cities