Which Tax Regime to choose?

Calculate your Tax Liability and compare Old & New Tax Regime
Slider

Property Tax - Definition, Types and Calculations

author portrait

Yesha Dalwadi

Income from House Property
Property Tax

In India, Property tax is levied by the Municipal authorities on the real estate. This tax is based on the area, construction, size and value of the property etc. This article will help you understand various aspects related to Property Tax in India.

What is a Property Tax?

The term Property with regards to taxation refers to all tangible real estate owned by an individual and consists of a house, office building and premises rented to third parties. Property tax is an amount that is annually paid by the land/property owner to the local government or the municipal corporation. The amount that is collected in the form of this tax is used for maintenance and upkeep of public properties like roads, sewage system, parks, government buildings etc.

What are the Types of Property?

Properties in India are broadly classifies into 4 main categories:

Land: This is the most common kind of property owned by the citizens of our country. It is to be noted that land here means the core land without any construction or improvement.

Improvements made to the land: This is the second kind of category which includes improvements made to the land such as constructing a building or godown.

Personal property: This includes movable properties such as cars, buses, cranes or trucks.

Intangible property: Intangible property comprises the ownership of assets such as patents, trademarks, and royalty.

How is Property Tax Calculated?

Property tax in India is calculated keeping in mind various factors. The method used to calculate this may vary from one municipal corporation to another but the overall computation will remain the same.

Firstly, an assessment of the property is carried out by determining the area it is in, different amenities provided, the status of occupancy, type of property (residential, commercial or land), year and type of construction (multi-storied/ single floor/ pukka or kutcha structure, etc.), floor space index and carpeted square area of the property.

After determining all these parameters, the government body uses one of the following methods to determine the property tax:

Annual Rental Value System or Rateable Value System (RVS)

Tax under this method is calculated on the yearly rental value of the property. This value must not necessarily be the actual rent collect from the property. The valuation of the rent is decided by the municipal authorities keeping in mind factors such as size, condition of the premises, location, amenities etc. Hyderabad and Chennai are two big cities whose municipal corporations follow this method.

Capital Value System (CVS)

Under the Capital Value System tax is calculated as a percentage of the market value of the property. The market value of the property is determined by the government and is based location of the property. This market value is published and revised yearly. Mumbai’s municipal corporation follows this method.

Unit Area Value System (UAS)

As per this method, tax is calculated on the per-unit price of the built-up area of the property. This per-unit price is based on the property’s location, land price and usage. This value is then multiplied with the built-up area to calculate the final tax value. Municipal authorities such as Kolkata, Delhi, Bengaluru, Patna and Hyderabad use this method.

How to pay Property Tax Online?

  1. Go to the official website of Municipal Corporation

    Visit the official website of the concerned municipal corporation

  2. Select Online Service and go to ‘Pay Property Tax’

    Choose the option ‘Pay Property Tax’ and move to the payments option.

  3. Fill out the right form

    Fill out the right property tax form, i.e. form 4 or 5, based on property type and the respective category.

  4. Enter the correct assessment year

    While filling the form, choose the correct assessment year, i.e. the year for which the tax is to be calculated and paid.

  5. Enter the Property Identification Number

    Now, enter the property identification number, property documents and other required information such as the owner name.

  6. Choose the mode of payment

    After entering all the relevant information, choose the mode of payment.

  7. Print the challan for refrence

    After successful payment, a challan is generated on the screen. Take the print out of the generated challan for future references.

How to Calculate Income from House Property?

Following points must be kept in mind while calculating Income from house property:

Income Tax Deductions on Income from House Property

One can avail a tax deduction on the income from house property under sections 24 and 80C.

Section 24 is called ‘ Deduction from Income from House Property ‘ and under the following scenarios the amount earned will be considered as income from house property:

The two types of deductions that are available under section 24 of the Income Tax Act:

Standard Deduction:

Under standard deduction, the sum equivalent to 30% of the net annual value does not fall under the tax limit.

Interest on Loan

Deductions Under Section 80C

As per section 80C, individuals can claim a deduction of up to INR 1.5 lakhs on stamp duty and registration charges while purchasing a new house. Individuals can also claim a deduction for any other expense incurred during the process of transfer of property. 

FAQs

I am a tenant, am I suppose to pay Property Tax?

No, in India, the house owner is liable to pay the tax on the property.

How many times a year does one have to pay Property Tax?

Property Tax is annually paid by the owner of the property to the municipal authorities.

Got Questions? Ask Away!

  1. Hi @Dixita

    Property tax is levied by the Municipal authorities on the real estate which consists of a house, office building and premises rented to third parties. While calculating Income from House Property, the net annual value is calculated by subtracting municipal taxes from the gross annual value of the house.
    Therefore you can claim property taxes while calculating Income from House Property

Close Bitnami banner
Bitnami