Every property is an asset for which tax is payable to the municipal corporation or the local state government and it is important that you know the various property tax documents required for the purpose of tax assessment, filing, and payment. Tax payment can seem like a lengthy procedure which is also regarded as complex. Due to factors like these, payment of tax is considered as a burden by most of the taxpayers. Thus to ease the process and avoid lengthy queues, most of the state governments have introduced online payment of the property tax. 

Property tax is a sum levied by the local state government or the municipal corporation based on the government policies for maintaining several amenities such as road, sewage system, lighting, etc. The amount is payable either annually or every six months. The amount may vary from state to state and from cities to cities. It is also levied depending on the rental annual value of the property. Besides the location and size of the property, factors such as age and the income generated out of the property can also affect the determination of tax. 

[lwptoc numerationSuffix=”dot” title=”Table of Contents” width=”full” titleFontSize=”16px” itemsFontSize=”16px” colorScheme=”light”]

What kind of property will fall under the ambit of property tax and what is a property ID? 

The real estate properties which consist of buildings constructed are the kind of property that falls under the head of property tax. Vacant land is generally not taxable under the ambit of property tax. The various kinds of property that are taxed in India under this head are:

  • Residential houses, flats, personal property such as cars, vehicles, or any other kind of machinery.
  • Office buildings, shops, factories, and go-downs.
  • Lands that are in undeveloped or rudimentary form without any construction.
  • Properties on which improvements or up-gradations have been made which is immovable like a building.
  • Intangible properties such as patent, copywriting, etc. which can be contrasted with tangible property. 

The municipal authority appoints a unique identity number to each property at the time of registering it which is also recorded in every government document and is necessary for paying tax online. 

What are the factors that help in determining tax?

The various factors that contribute towards the calculation of the property tax are:

  • The property that is situated in a neighborhood that is closer to the city or in any porch area is valued higher than the ones in other localities.
  • The construction works done on the property is also something that helps in valuing the property for tax. The age of the construction is also a factor that helps in determining the value.
  • Factors such as the number of possession and the area that is covered by the construction also play a vital role in the calculation of the value of the property and thus contribute towards the determination of tax rate. 

However different factors need to be assessed before deciding the value of the property. The fee for the assessment of the property tax is completely nil or free. 

What are the necessary documents for property tax?

The various documents that are required to determine the property tax are:

  • Sales Deed, Index II, 7-12 extractor City survey extract:

The sales deed is a document that shows the sale of the property. The sales deed is a valuable and conclusive proof of ownership. Apart from the fact that it is conclusive proof of ownership, it is also important as it helps in the determination of the tax according to sections  43CA, 50C, and 56(2)(x) of the Income Tax Act. Sections 43CA and Section 50C are sections that apply to the seller and section 56(2) (x) applies to the buyer. These sections also state that if the stamp paper value of the property is higher than the value of the agreement, then the difference between them is charged as tax under the head ‘income from other sources’. 

Index two under section 55 of the Registration Act provides for the properties and documents that are mentioned under section 21 of the Act. The 7/12 extract is a land record for tax and it shows the right of possession vested in the taxpayer. However this cannot be used as a complete proof of title, thus cannot be used to transfer the same. 

  • Documents that are provided by the building permission department:

Another set of documents that is important in property tax is the documents obtained from the building permission department which is inclusive of building permission certificate, occupancy certificate, building completion certificate, and the approved plan. Before the construction process is started on the property the commencement certificate must be obtained after the inspection and approval of the building plan. It is important to obtain the completion certificate from the concerned authorities for obtaining any tax-based benefits. It is not only important for receiving tax benefits but is also very important for tax rolling.

How is the tax amount calculated?

While considering the question as to how the tax on the property is calculated, it is important to know that there are different methods that are followed by different civic corporations. The amount payable as property tax can be easily calculated through the website of the concerned corporation. Listed below are a few methods and policies followed by different states.

  • Annual rent value:

It is basically the amount that is charged in case of the property being let out on yearly basis. The amount payable as tax is based on the annual rent on the property. In cases of properties which are self-occupied, the value on the property is zero. Likewise, the properties which are not let out or are not being occupied by the owner will also have its value as zero. The gross annual rent levied on the property by the municipality is higher than actual rent received or expected. This is the method followed by the municipalities of Chennai and Hyderabad.  

  • Capital value system:

This is another method that is followed by some state governments in India. According to this method, the rent is payable based on the market value of the property. The valuation of the market value of the property is made by the local government and is revised annually based on the Ward in which the property is situated. Under this system, a percentage amount of the market value is payable as tax. The determining market value of the property is published on different pubic platforms. 

  • Unit Area System:

This is a system that has been followed by municipalities such as Delhi, Kolkata, Bengaluru, and Hyderabad among the various other municipalities. The tax, under this system, is levied based on the price of the built-up area of the property. This system takes into consideration multiple factors such as expected returns on the property, location, land price, usage, etc. The per-unit price of the built-up is first calculated and then is multiplied with the total built-up area of the property to determine the final tax payable on the property. 

Conclusion

Summing up it is to be stated that every property is taxable by the local state government or the municipal corporation. The various factors that influence the tax rates of a property are neighborhood, construction, the land coverage, the age of the construction, etc. More precisely, only real estate properties are taxable under the property tax. Various documents help determine the tax on a property.

The first set of documents includes the sales deed, the property belong to Index II, 7/12 extract, city extract, etc. and the next set of important data required for tax is inclusive of the documents issued by the building permission authority such as the approved building plan, commencement certificate, the building permission certificate, and the occupancy certificate.