The primary objective therein is to raise public revenue to fund government programs, such as provisions of goods & services, like health and education. This function is naturally the most important function of the tax system and all other purposes, although important, are ultimately incidental because, without an adequate revenue stream, the State would not be able to move further with any of its measures. Thus, as a result, the primary source of income for the government is through the collection of taxes.
One such tax in furtherance of the objectives of a collection made therein is Property tax, which is an annual amount which is paid by the property owner to the government. Property can include all tangible real estate property, house, office building and other property that has been rented out. These taxes are to be paid to the local state government or the municipal corporations.
The amount that is collected through property tax is used for improving the local infrastructure like the maintenance of schools, repairing roads, providing sanitation, etc. There is a different property tax that is imposed in different states in India.
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What is a property tax and what are the deductions under income from house property?
Owners of real estate property who have rented out the property owned by them, have an option to claim the deductions from the rental income. This type of deduction is called a property tax deduction.
Deductions from the income from house property are mentioned in Section 24 of the Income Tax, where the house in which a person lives cannot be considered to provide income. The deductions that are present under Section 24 are –
Standard deductions –
A taxpayer can enjoy exemptions when the income that is received from the house or houses is 30% of the net annual income. It means that the tax payer does not have to pay tax if the income is 30% of the total income.
Interest on loan –
The interest amount that is paid on the amount of the home loan which is obtained for either purchase, renovation, or construction of a property, is exempted from taxes.
Tax deductions available under Section 80C –
- A person can claim deductions under this section when a new house has been purchased. Deductions can be claimed on the payment of the stamp duty and the registration costs, which mostly amounts to 10% of the purchase amount of the house. The maximum deduction that can be availed under Section 80C is Rs. 1.5 Lakhs.
- Deductions can also be claimed for the expenditures incurred during the transfer of newly constructed residential property.
Who pays the local property tax?
Property tax is a tax that is paid by the owner of the property to the local government or the municipal division of the city. The tax amount depends on the value of the land, area, and region. It may vary depending on the amount that is levied by the local authorities.
In India, the onus of paying property tax lies with the house owner, i.e., the owner of the property has to pay taxes. A tenant of the property cannot pay the property tax. If a tenant is forced by the house owner to pay the property tax amount, the house owner can be sued in civil court.
Does the property tax go to the State?
Property tax, also referred to as house tax, is a tax that is imposed on real estate property owners by municipal authorities like the panchayat and municipal corporations. It is levied by the State Government, unlike Income Tax, which is charged by the Central Government. This tax is used for the maintenance and upkeep of the area, such as roads, sewage systems and other facilities. This tax is levied on all real estate properties, which include residential and commercial buildings, attached land, etc., but is not applied on vacant plots of land with no adjoining building.
Are there any States without property tax?
There is no State which does not impose a property tax. Property tax is levied on real estate properties which include residential and commercial buildings, attached land, etc., but is not applied on vacant plots of land with no adjoining building.
Since property tax is imposed by the State Governments to generate income for public purposes and to develop the amenities provided by them. This tax is imposed by municipal authorities like the panchayat and municipal authorities for the maintenance and upkeep of the area, such as roads, sewage systems, and other facilities.
It can be seen that property tax has to be paid by every individual who owns a property. The property which is owned by the owner and which does not generate any rent is also required to pay property tax. In some cities, if the property is given out on rent, higher rates of property taxes are seen to be applicable.
There are five types of properties on which property tax is availed by the municipal corporations. These are residential houses, office buildings, factory buildings, flats and shops. It is to be noted that property tax is not charged on any vacant property which is not attached to any building.
The amount of money that has to be paid as property tax is calculated on the basis of annual value, which is determined from whether the property is self-occupied or is let out on rent. If in case the property is self-occupied, the annual amount will be classified as ‘NIL’, and if the property is let out on rent, then the annual amount includes municipal valuation, rent amount which is received, and the fair rent amount which is ascertained by the Income Tax department.
Thus, it can be seen that different states in India levy different charges of property tax on real estate properties. Based on the standard of living which is available in the state, the municipal authorities may levy different limits of property taxes.