Property tax is the tax paid by an individual on a property owned by him/her or by other legal entity, such as a corporation. It is a real estate tax which is paid annually.
The owner of a property has to pay a tax to the government or the local municipal corporation annually or semi-annually. This tax paid by the owner is the property tax. This direct tax is applicable to properties like house, commercial property, real estate, land, and so on.
Property tax is applicable for land with or without construction. The category of the property depending on the area is evaluated by the municipality of that area to assess the tax payable. The appraisal of the property is also done by the municipality of that area. The tax so collected will be utilised to improve and maintain the infrastructure of that area like roads and schools.
Since property tax is determined based on the area where the property is located, it is different for areas within the city and for areas between cities. It is also different for each municipality depending on the locality.
If any kind of business is carried out in the property owned, then that income is categorised under 'income from business' for tax purposes. The expenses incurred towards repairs and renovations of such property can be claimed as business expenditure.
Additional Info: Also check Top 10 Largest Banks in India
Properties are classified into different categories to make the assessment of tax simple and specific to a category. There are four categories:
Additional Info: Also check Plot Loan
The following are the advantages of property tax:
Additional Info: Also check Home Loan Tax Benefit
The following are the disadvantages of property tax:
Under Section 24, deductions from income of the house property are allowed in the cases mentioned below:
The deductions are of two kinds under Section 24 for a property owned in India:
The following are the exemptions against income:
If you are a freelancer or self-employed, submission of the document, i.e., the interest certificate for verification is not required. The certificate will be required only to calculate the advance tax liability for each quarter. The certificate must be available only if the IT Department raises any queries.
Capital Gain is the profit made out of selling a property. The profit earned out of the sale is taxable. If the sale proceeds are reinvested in a new property within 2 years then you need not pay tax on the profit earned out of the transaction.
Additional Info: Also check Income Tax Slab Rates in India for Financial Year
The procedure for the calculation of income from house property is as follows:
The loss under income from house property was allowed to be compensated from other heads of income up to any amount till the FY 2016-17. Such set off has been restricted to 2 Lakhs from the FY 2017-18. This amendment does not impact taxpayers having a property which is self-occupied. However, taxpayers who are earning an income by way of rent will be impacted by this amendment. There is no limit to claim a deduction on the Home Loan interest under Section 24 but the loss incurred out of such interest payments is restricted to 2 Lakhs.
The following factors have to be considered for calculation of property tax:
The formula applied for calculation of property tax is:
Property tax = base value x built-up area x Age factor x type of building x category of use x floor factor.
Penalty to between 5% and 20% will be levied on late payment of property tax. The late payment charges vary from state to state. Depending on the individual state policies, the late payment charges can either be waived or reduced.
A large number of Indian municipalities have made the payment of property tax convenient and hassle-free by providing an online platform for paying it. The normal steps for online property tax payment which may vary for certain town or city corporation, are detailed below and you need to follow them to make the process hassle-free.
You can pay the property tax online through the online platform provided by a majority of the municipalities in India. You can pay the property tax by visiting the municipal website and by providing the Khata Number, Property Identification Number or the Revenue Survey Number.
The points to remember for payment of property tax online are as given below:
Know how good your score is
Get insights on how to improve it
Unlock offers as per your score
Since the online payment of property tax is a new concept in India not all the municipal corporations are offering this facility. You should clarify with your respective municipal corporation as to whether the facility is available.
A person who becomes the owner by implication is a deemed owner. Deemed owner is any other person other than the person in whose name the property is registered. The person liable to pay the tax is the deemed owner.
A person can be termed as a deemed owner in the following instances:
Property tax is not applicable for lands used solely for agricultural purposes. Otherwise, vacant lands are liable for property tax.
The provisions are available to claim an exemption on property tax based on the following:
If there is a dispute regarding the title of the property in the Court of Law, the assessing officer has the authority to assign one person to pay the property tax. Later if the court ruling is against the person who was assigned to pay the property tax, he or she can claim the amount from the other party.
For a house property that is rented out, the owner of the property should pay the property tax.
The properties that are exempted from property tax are:
In the case of joint ownership, the property tax is payable by each co-owner in proportion to the shareholding as mentioned in the legal document.