Property Tax in India – Types, How to Calculate & Payment Option
A property owner must be aware of “property tax”. The property tax in India is a recurring charge payable by the owner on an annual or semi-annual basis. They need to pay the property tax to either the Municipal Corporation or the local government of their locality. The property can include houses, tangible real estate, shops, office buildings, land, premises rented to third parties, etc. Before making a real estate investment in a luxury property in Gurgaon or other types of property, the knowledge of property tax is vital. Let us under its types, ways to calculate, and payment options.
Types of property tax:
Here are the details of the categories of property tax.
Taxes are imposed on different categories of properties based on their usage and purpose. The two main types of property taxes in India are:
Residential Property Tax:
This type of property tax is imposed on residential properties, including houses, apartments, condominiums, and residential land. The tax rate is determined based on factors such as the property’s location, size, and the amenities available in the vicinity.
Commercial Property Tax:
Commercial property tax is imposed on properties that are used for commercial or business purposes, such as shops, offices, hotels, and other commercial establishments. The tax rate for commercial properties may differ from that of residential properties and is often calculated based on the property’s rental value, location, and other relevant factors
Methods to calculate property tax:
Whether you ought to pay Municipal Property Tax or Capital Gains Tax on Property, you must consider the important aspects to ensure accuracy. The calculation considers the property type, its location, occupancy status (Self-occupied or rented), infrastructure available in the neighborhood, carpet and floor area, number of floors, etc. Here are three methods to calculate property tax.
1) Capital Value System:
The municipal authorities follow this method. As per this system, the tax is charged as a percentage of the market value of the particular property. The state government annually determines the market value of the property.
2) Unit Area Value System:
In this method, the tax is charged per unit cost of the property’s built-up area. Per unit cost considers the property’s expected returns according to its land, location, usage, and price. The final property tax amount is determined by multiplying the calculated per-unit cost with the total built-up area.
3) Annual Rental Value System:
Its alternate names are Rateable Value System or RVs. This method calculates tax on the property’s annual rental value. The municipality decides this price considering the property’s size, location, vicinity to landmarks, and amenities.
Parameters considered when calculating the property tax:
Most types of properties consider the below parameters for property tax calculation.
- The property’s size and location
- Property status (ready to move or under-construction)
- The owner’s gender (Note: female property owners may receive a concession)
- The owner’s age (Note: Senior citizens may receive discounts on property tax)
- The range of civic services/facilities offered by local municipal governments
- Property Tax Exemptions and Rebates (if applicable)
After considering these variables, the local municipal bodies use the following formula to calculate property tax.
Property tax = built-up area x building type x age factor x floor factor x category of use
Property tax payment options:
Whether you buy a 3 BHK builder floor or 4 BHK apartment or other forms of property, you must know the process to pay property tax.
Offline mode:
In this option, an individual has to visit the local municipal office and then submit the property tax amount at the property tax collection counter. Subsequently, the taxpayer gets the payment receipt.
Online mode:
Most municipal corporations support online mode of property tax payment. This option saves time and effort.
Here are the steps for online property tax payment:
Step-1: Log in to the official website of the municipality/city corporation.
Step-2: Select the property tax tab and search for the payment option.
Step-3: Select the property tax online application form based on the property’s category.
Step-4: Enter the required details like property types, location, etc.
Step-5: Select the assessment year and select the previous year to balance the dues (if exist).
Step-6: Enter other essential details like identification number, plot number, Revenue Survey number, etc.
Step-7: Opt for the suitable payment option to pay via debit/credit cards or internet banking.
Note: These steps can differ based on the city corporation.
Conclusion:
The discussed aspects help ensure accurate property tax calculation and payment. The knowledge of property tax helps the property owner effectively plan the budget for the preferred property.