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All You Need To Know About Property Tax

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All You Need To Know About Property Tax

Buyers are now becoming increasingly aware of the various rules about the property tax as studies reveal a rise in the percentage of owned houses

According to the 2011 census, India has around 68 percent of rural households and 32 percent of urban households. Overall, around 86 percent of these households are living in owned houses which is much higher than the percentage during the 2001 census. 

With the joy of becoming a homeowner comes the responsibility to know about property tax and the various important things about it. Recently, the Maharashtra government decided to waive property tax on residential units of up to 500 square feet within the Mumbai municipal area limits. 

RealtyNXT lists the important things that one must know about property tax.

What Is Property Tax?

Property Tax refers to the amount paid annually or semi-annually by the owner of a property to the state government or the municipal corporation, depending on government policies. The property includes tangible real estate property, land, the homeowner’s house, office building and the property that he might have rented to others.

This tax is paid for maintaining the basic civic amenities in the area around the property like roads, sewage system and lighting. 

Factors That Influence Property Tax

The amount paid as property tax by the property owner is determined by several factors. With changes in these factors, the property tax varies from one place to another.

The most important factor is the size and location of the property. This means that the property tax of a house in Ranchi is different than the property tax of an apartment in the city of Mumbai. 

Secondly, property tax also matters on the condition of the property. This means that tax imposed on a property under construction is different than that of a property that is ready for possession.

Next, the gender of the property owner matters. Usually, female owners get more rebate than male owners. 

Fourth is the age of the property owner. Senior citizens who own property need to pay lesser tax than younger property owners. 

Penalty For Not Paying Property Tax

Property owners must make sure that they pay the property tax regularly. Failure to pay the tax can cause penalty charges. These charges vary from one state to the other. Generally, the penalty charged would be around 5 to 20 percent of the payable sum.

However, as mentioned earlier, this percentage varies from one state to the other and also depends on the municipality policies of the place. In some extreme cases, the property may even be confiscated.

Property Tax Deductions

After the passing of the Income Tax Act in 1961, Indian citizens became entitled to some deductions from paying property taxes. Section 80C of the Income Tax Act allows deductions on the registration and stamp duty charges on the purchase of a new home. However, the maximum amount of deduction allowed under this section is Rs 1.5 lakh only. 

Under this section, one can also claim deduction on the expenses spent during the transfer of the property

How Property Tax Is Calculated?

There are three ways in which property tax is calculated by the municipality authorities. The first method is known as the Capital Value System (CVS) in which the amount of tax to be paid by the property owner depends on the market value of his property. The market value of the property is determined by the government and also depends on the locality of the property. This system is followed in Mumbai.

Next is the Annual Rental Value System or Rateable Value System (RVS) in which the property tax depends on the yearly rental value of the property. This rental value is determined by the municipality based on the condition, size and location of the property. This system of calculating property tax is followed in Hyderabad and Chennai.

The Third is the Unit Area Value System (UAS). Here the property tax depends on the per unit price of the carpet area of the property. The carpet area refers to the usable floor area of the property, excluding the thickness covered by the internal/ external walls. This system of calculating property tax is used in Delhi, Kolkata and Bengaluru. 

Payment of Property Tax

With the ease of technology and to save time, most property owners prefer to pay it online although one can pay it offline as well. The website for paying the property tax online varies from place to place. In Mumbai, one can pay it on the website of Municipal Corporation of Greater Mumbai.

To pay it online, the property owner needs to log in through their unique Property Tax Number or Khatha Number. In case of delay in the payment, a minimum interest of 2 percent is charged per month.   

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