What is Property Tax and how is it calculated?

Real estate owners need to pay property tax which is calculated in different methods in different states and cities and even in different zones of the same city.

Nishant just became a proud owner of an apartment in Hyderabad. He knows that he has to pay property tax on his property. But he is not sure what property taxes are and how property tax is calculated.

We will now look at what is property tax in India. Property tax, also referred to as house tax is a tax that real estate owners need to pay. Local municipal authorities oversee the distribution of this tax among all the properties within their jurisdiction. The money collected through property tax is used to maintain local civil amenities. This would include roads, drainage system, lights, parks and other local infrastructure. Property tax is levied on all kinds of real estate- both residential and commercial property, attached land and also any improvement made to the attached area. But such tax is not applicable on vacant plots which do not have any adjoining building. There is no fixed property tax across the country. It varies between cities, states and may also be different in different zones of the same town. Different municipal bodies have different methods to calculate property tax.

How is property tax calculated: We have seen what is property tax India. Now, we will see how property tax is calculated. Property tax is charged in a particular proportion to the assessed value of a property. There are three ways in which property tax is calculated.

Capital Value System (CVS): In this method, the market of value of the property is considered to arrive at the tax to be paid. The government determines the market value, and it is based on the location of the property. The market value of a property is published annually and revised every year. This method is used in Mumbai to calculate property tax.

Annual rental value (ARV) or rate-able value: Here, property tax is calculated based on the yearly rental value of the property. However, this is not the actual rent amount the landlord is collecting. The rental amount is decided by the municipal authority based on the size of the property, location of property, the condition of the property premises, amenities, nearby landmarks, and so on. Hyderabad and Chennai follow this method to calculate property tax.

Unit Area System ( UAS): Here, the tax is levied on the per-unit price of the built-up area. This price is fixed on a per square foot per month basis depending on factors like location, land price and usage. This is followed in cities like Delhi, Kolkata and Patna.

Payment of property tax: Property tax can be paid at the office of the municipal corporation or also sometimes in individual designated banks. Nowadays, you can also pay property tax on the website of your corresponding civic authority. This makes paying of property tax very convenient.

One needs to pay the property tax on an annual basis. There is a specific due date for the payment of property tax. If you pay by that date you can get a rebate. What you do need to note, there is an additional interest for any late payments.

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