Property Tax: Everything You Need to Know

Owning a house is one of the most important decisions a person makes in his life. It is something that everyone aspires to have someday. Along with food and clothes, shelter is one of the most fundamental requirements for human life.

Property Tax

Taxes on real estate

But, before taking that jump, there are a few things to consider. When a person buys a home, he or she must register the property and pay property taxes in order to become the owner. Unlike one-time taxes such as stamp duty and registration fees, property tax is an ongoing charge that the buyer must pay every year.

Property tax is a local tax paid by municipal governments to fund the upkeep of essential civic facilities such as roads, water, sewage, sanitation, drainage, and lighting. Property taxes vary by state, city, and municipality. It is the primary source of revenue for governments all around the world. Residential residences (either owned or rented), office buildings, manufacturing buildings, godowns, flats, and stores are examples of real estate assets.


In India, there is a property tax.

In India, property tax has a long and illustrious history. Kingdom rulers used to collect a modest tax on farmers and landowners to fund the kingdom’s treasury, which was subsequently reorganized and simplified with a centralized system under the British occupation. In India, this resulted in the establishment of tax collectors and a structured revenue collecting system.

In India, property tax applies to both land and improvements on it, with the government charging the tax in proportion to the land’s worth. This assessment and determination of the annual property tax to be paid, which differs from place to place, is the responsibility of the involved municipality. Property tax is levied in India on structures and the land they are built on. Vacant plots without any structures adjacent to them are exempt from taxes.


Property Tax Influencing Factors

– Size of the property and its location

– Stages of Construction (Ready-to-move or under-construction)

– The property owner’s gender (incentives for female owners)

– The property owner’s age (exemptions for senior citizens)

– The local government’s infrastructure is excellent.


Property Tax Calculation

Different taxing methods are used by different local governments. The three methods for computing property taxes are listed below.

Annual Rental Value Method – This taxation system is based on a property’s total annual projected rent as determined by the local government. This approach considers the gross yearly rent that may be received from the property rather than the actual rent collected on the property. When determining the annual rental value, factors such as the property’s size, location, and amenities are taken into account.

The market value of a property is used as the basis for levying property taxes under the capital value system. The local government calculates the market value of properties and revises it annually based on demand and the state of the infrastructure in the region. Every year, the municipal authority publishes Ready Reckoner rates for various regions around the city as a fair comparison.

Unit Area Value Method — This system is based on property size and determines the price based on the property’s built-up area. The annual projected profits from the property are computed and corresponding taxes are charged based on this pricing.

When it comes to taxation in our nation, several exclusions are taken into account. Few local governments provide property tax exemptions depending on variables such as age (ultra elderly people), geography (famine-affected areas), individual net income (LIG), kind of property, and so on.


– Capital value= (Property Market value) x (Carpet Area) x (Age of building Weightage) x (Construction type Weightage)

– Property Tax= (Base Value) × (Built-up Area) × (Age Factor) × (Type of building) × (Category of Use) × (Floor Factor)

The location of the property, the type of property (commercial, residential, etc. ), the occupancy status (self-occupied or rented out), amenities (car park, rainwater harvesting, etc. ), the age of the building, the type of construction (multi-story/ single floor/ pukka or kachcha, etc. ), the FSI, and other factors go into determining the property tax assessment.

Taxes on real estate

Property Tax Payment

Land-related services and property taxes in India can be paid online through local administrations’ official websites. This has simplified the previously time-consuming procedure of paying property taxes and now allows for quick and easy payment. Property tax can also be paid offline, in person, at municipal offices or at chosen banks approved by the local government. The owner of the property is always responsible for paying the tax, not the occupant.

The following are the easy methods for paying your property taxes online:

– Go to the appropriate municipal authority’s official webpage.

– Select “Pay Property Tax Online” from the drop-down menu.

– Fill up your Property ID and name from the property records.

– After the given data has been validated, the system will prompt you to input your phone number and email address.

– You can access your account with a One-Time Password (OTP) texted to your phone number.

– Select the property tax assessment year for which you must pay.

– Individuals can choose their preferred online mode of payment from the available alternatives and pay property tax online once all essential information has been filled out.


In case of non-payment, there will be a penalty.

If you don’t pay your property tax on time, you’ll be charged a penalty, which is usually a percentage of the amount you owe. Nonpayment of property taxes is a serious offence that may result in hefty fines, which vary by state. Late payments on property taxes usually result in a fee of 5-20 percent of the total amount owed. In severe situations, the property may be taken away.


Deductions under the Real Estate Tax

After deductions under Section 24 of the Income Tax Act, all rental income and the yearly value of extra dwellings (other than self-occupied) will be taxed. Section 24 is headed “Deductions from income from house property” and can be used in the following situations:

The rent received will be counted as part of the property revenue if the residence is rented out.

If a person owns more than one house, property income is calculated using the Net Annual Value (of the empty house).


Deductions under Section 24 of the Internal Revenue Code

Section 24 of the Income Tax Act allows for the following types of deductions:

Standard Deduction: Amount equal to 30% of the Net Annual Value (NAV) of non-self-occupied property is excluded from the property tax limit. A self-occupied home is not eligible for this deduction.

Interest on a House Loan: Interest paid on the principle amount of a home loan is tax-free. A home loan can be used to finance the purchase, construction, or renovation of a residence. A homeowner can claim up to Rs.2 lakh in tax deductions if the loan is for a self-occupied property.



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