Property Tax is a primary source of income for the local government bodies. They can also be stated as a significant expense for the homeowners every year. The tax imposed on the property continues even after you pay off your mortgage amount. The imposition of the property tax starts with the property tax assessment. You must know how your property tax is calculated as it will provide you with an idea in regards to the amount that needs to be paid to the government as tax. This thus helps in planning your budget as you will be fully aware of the expense you may incur.

The calculation of your property tax is done by considering the value of the property, the exemptions that are allowed on your property, and the rate at which the tax is applicable on your property. Factors like property size, construction type, age, and location can affect the calculation of your tax amount. The usage (residential, agricultural, apartment, office, commercial, vacant land, etc.) of the property is another factor that affects the tax imposed on your property. If you have any issues regarding the assessment then you may approach the local government and apply for the reassessment of your property.

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How is property tax calculated?

The Constitution of India permits the government to impose taxes, tolls, duties, and fines. The tax imposed on the land falls under the jurisdiction of the state government and the property tax is calculated by the municipal authorities. The property tax is calculated mainly in three different manners.

  • Capital Value System:

The tax is imposed under this system on the market value of the property. The market value of the property for the imposition of the tax is determined by the government after considering the locality of the property. The amount is annually revised and published by the government. States like Maharashtra follow this system for the calculation of taxes.

  • Annual Rental Value System or Rateable Value System (RVS):

This is a system in which the tax is imposed on the annual rental amount of the property. The rental amount is not necessarily the amount that is collected from the property, it can also be the rental amount that is fixed by the municipal corporation on similar properties. The amount so fixed can be based on the size, location, condition of the premises, proximity to the landmark, amenities, etc. of the property. Cities like Hyderabad and Chennai also follow this system for the imposition of Taxes.

  • Unit Area Value System (UAS):

According to this system, the amount is payable based on the price of the per built-up area of the property. The price is fixed according to the per square foot per month, based on the expected income from the property by considering factors such as location, land price, usage, etc. This is then multiplied with the built-up area of the property. Municipalities such as Delhi, Kolkata, Bengaluru, Patna, etc. impose tax by following this taxation system.

How to pay property tax?

You can make the payment of the property tax by visiting the municipal corporation office in whose jurisdiction your property falls or the banks that are authorized or affiliated with the municipal corporation. You may be then required to provide the property tax number or the Khata Number to identify the property for which you are making the payment. In the current digital era, the tax payment has been made more convenient for the buyer as you may also make the payment of your taxes through the online portal of the municipal authority.

Municipal authorities often provide certain exemptions based on factors such as location, age, net income of the owner, type of property, etc. it is also important to verify these with your local authorities to assess your tax liabilities accurately. In India, the tax rates vary not only based on the state in which the property falls, but it may also vary according to the municipal corporation or the local government in which the property falls along with the locality and type of the property.

The payment of the property tax needs to be made on an annual basis and the late payments can invite penalties. These penalties are generally in the form of interest on the amount due and it may come up to 2% every month. The onus of making the payment on the property lies with the owner of the property and not with the occupant of the property.

Guidelines for online payment of Property tax

You may pay your property tax online if you wish to do so by filling up the form so provided on the website of the concerned government authority and providing your Property Tax Number or Revenue Survey Number or Khata Number. However, listed below are few guidelines that need to be followed by the property owners while doing so. These are:

  • If there is any balance or excess payment, then it may be adjusted to your previous year’s dues or paid back to you through DD or cheque post verification.
  • The property tax for a particular year includes the outstanding amount from the previous years as well.
  • You may also make the payment in two installments using the same form. In case you wish to settle the amount in one installment, then you are also eligible for a 5% rebate.
  • To make payment of the previous year, you must obtain a challan issued for the same.

Conclusion

Summing up, property tax is the tax amount imposed by the state government on the property annually. You must know how the property is assessed and the property is taxed to plan your budget. Various factors such as property size, construction type, age, and location can affect the assessment of the tax amount. Factors such as the usage (residential, agricultural, apartment, office, commercial, vacant land, etc.) of the property are also considered while calculating the tax imposed on your property.

Capital Value System, Annual Rental value System, or Rateable Value System and the Unit Area Value System are some of the methods in which the property tax is imposed. The payment of the property tax can be made to the Municipal Corporation, affiliated bank, or through the government online portal.