The most important stuff you should know about construction taxes

The lesser-known facets of construction taxes, as well as the different ways it affects the owner, are discussed in this report.

You must be acutely aware of the costs that you must pay as an asset owner as a landowner. You’ll have to pay an annual property tax on this revenue-generating commodity in addition to paying tax on it under the income tax (IT) rules. On all counts, however, the care of land and buildings differs. The numerous lesser-known facets of building tax are explained in this report.

about construction taxes

Is there a distinction between a construction tax, a land tax, and a house tax?

While the words property tax, house tax, and building tax all mean the same thing, their meanings are not the same in India. Although the land tax is the general name for the yearly tax that the owner must pay to the local government depending on the property’s annual rental value, the term house tax (also known under the heading “Income tax on house property”) is used to refer to the deductions from the annual income, because of your land ownership and the future benefits generated by this income-generating asset This estimated revenue is applied to the annual income, and tax is withheld from the total sum based on the tax bracket.

Building tax is also known as mileage tax in some countries, but this is not usual in India.


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How to Work Out Your construction Tax

Municipalities grant an annual fee to buildings based on a variety of factors in order to levy a property fee. In India, civic bodies use a variety of methodologies to determine the annual worth of houses, including:

Annual rental value system: This process, which is used by municipal governments in Chennai and Hyderabad, considers the monthly rent that a property has the capacity to produce.

Previously, the judiciary held that the ‘fair’ rent, as specified in the respective state governments’ Rent Control Acts, should be used to determine the property tax base, rather than the real or presumptive rent. Later, the Supreme Court decided in different decisions that the assumed rent should be used as the basis for calculating property taxes.

This form of property valuation is known as the “unit area value” method where the unit of measurement is dependent on per sq ft per month for a certain place/street and compounded by a rate. This system assigns a per-unit price to buildings depending on their built-up area or carpet area and is used by municipalities in Ahmedabad, Bengaluru, Delhi, Kolkata, Hyderabad, and Patna. The units are assigned a rating depending on three criteria: location (primary main roads, secondary main roads, and others), construction styles (pucca with reinforced concrete roof, pucca with asbestos or corrugated iron, and others), and three use ranges (commercial/industrial, residential, and others). This results in a total of 27 possible variations.

The Patna Municipal Corporation was the first municipal body to adopt a presumptive area-based valuation system that took into account location, use, built-up area, and construction firm.

Land taxation is determined by the market value of the property is a capital value-based scheme.


Rates vary from state to state, city to city, and neighbourhood to neighbourhood.

Building tax (property tax) is imposed by municipal governments*, which rely heavily on its collection to fund their services to the general population. Building tax (property tax) is assessed and set by different jurisdictions using different methodologies. For eg, the municipal authorities in Hyderabad and Delhi do not use the same formula for calculating building taxes.

The Indian Constitution’s State List entry 49 states “taxes on lands and houses,” allowing local authorities to collect the tax in accordance with state statutes.

In most cases, buildings in urban areas are subject to a higher construction levy. For example, the Maharashtra Tax on Residential Premises Act, 1974, imposes a tax on residential premises incorporation areas with a floor area of more than 125 square metres in Greater Bombay and 150 square metres in other corporation areas.


Taxes are placed on both vacant land and buildings.

In our nation, property taxes must be charged on all buildings, even though they are empty. For the longest period, land ownership in India did not entail any property tax obligations. However, in light of low tax collection, economists have proposed that land and plots, as well as the built-up sector, be included in the tax base, even though the tax rate on the latter be kept lower. Although agricultural land is still largely exempt from taxation, states such as Andhra Pradesh, Tamil Nadu, Punjab, and Jammu and Kashmir have begun to levy a fee on vacant land within city limits.


Different styles of buildings have different building taxes.

Residential, industrial, administrative, and other styles of structures exist. Their tax status differs due to their distinct income-generating capacities. In truth, properties are divided into 70-80 categories, each with its own taxation. Because of their relatively poor income-generating capacity, commercial buildings typically face the highest rate of building tax.


Buildings that are excluded from paying taxes

India, as a welfare state, does not charge a construction tax on buildings that are used for public utilities. Places of worship, public establishments, and other structures are exempt from paying building taxes entirely or partially, charitable institutions, ancient and historical monuments, burial and cremation grounds, government land and buildings set aside for free recreational purposes, trade union offices, and buildings and lands of urban planning authority established under respective state government acts, Vacant lands and houses, properties of war widows and gallantry award recipients, international consulates, and central government properties, including the lavish homes of important bureaucrats and politicians. The lack of coverage of building tax collection in India is often attributed to these wide exemptions.

This is why some states have made paying a service fee for tax-exempt lands a requirement. The owner is required to file separate returns for this reason.


What is the procedure for obtaining a building tax exemption?

Many seeking a first-time exemption from property tax should submit an application, along with all supporting paperwork and the return containing the service fee due, to the commissioner. If the deduction is denied, the taxpayer would be responsible for paying the tax at normal rates.


Non-payment of building tax bears a penalty.

Property tax collection in India is slow as compared to other first-world nations, owing to low-income levels, which continue to encourage illegal construction, preventing a significant number of properties from coming under the jurisdiction of the civic authorities. While attempting to get more and more structures into the legal fold, local governments have already taken a number of steps to punish land tax defaulters.

In recent years, local bodies in cities such as Noida and Gurgaon have taken steps to seize buildings if the owner fails to pay high property tax debts. In certain cases, prisoners can be sentenced to prison for monetary offences. However, such actions are only taken against repeat criminals. Authorities also begin by disconnecting household service connections in order to compel occupants to pay the building fee.

about construction taxes

Is it possible to make a payment for building tax through the internet?

Apart from the major cities of Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Pune, Gurgaon, Noida, and Kolkata, most state capitals and tier-II and tier-III cities have built portals that allow for online payment of building tax. This is only available when an owner registers on the portal and provides necessary personal and property information.


The most pressing questions about the building tax

– Is it possible for me to pay the building tax as soon as I get my occupancy permit?

– The employer is responsible for paying the tax starting on the first day of employment and ending on the last day of employment, whichever comes first.

– Is it legal for me to pay the property tax for a single unit in an apartment without a plan or occupancy certificate?

– Yes, you must pay the property tax regardless of whether you have a plan or an occupancy permit. However, it does not guarantee the property’s regularisation.

– What if the building tax is measured incorrectly?

– If you fail to pay your property tax, you will be fined double the difference in tax, plus interest.

Is it possible for me to file an updated building tax return?

– If you wish to make some changes to the return form that applies to you, you should file an updated return.

– Is it not the responsibility of the building’s occupant to pay the tax?

– If the landlord fails to pay the property tax, the occupier should be held responsible.

– What types of transactions include a building tax receipt?


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For the following transactions, the building tax payment receipt is required:

– In order to register assets in sub-offices. Registrar’s

– For the sake of acquiring a khata certificate.

– For the purpose of receiving the plan’s approval from some responsible authority.

– To receive a trade licence, for example.

– Will the super-built-up area or the carpet area be taken into account when calculating building taxes for apartments?

– In the case of apartments, the carpet area is taken into account when calculating the building fee.


What exactly is a built-up area?

The entire area occupied by a building above the plinth level is referred to as the built-up area. It covers all enclosed spaces, such as basements, mezzanine levels, balconies, parking areas, built-in swimming pool borders, and underground or above-ground fuel storage tanks, Merchandise storage in open spaces such as wood, marble, bricks, etc., parking stilts, telecommunication and other buildings, and hoardings erected on the floor or roof of every property or building

The built-up area does not contain the following items:

– At ground level, there is a courtyard.

– Gardens are wonderful places to visit.

– Rocky terrain

– Structures that work well

– Plants are a kind of living being.

– Nurseries are places where children are raised.

– A platform is built around a trunk.

– Water tanks located above the ground

– Fountains are distributed across the region.

– Bench with an open top and similar items

– Drainage is important.

– Culverts are cylinders that run under the earth.

– Ductwork

– Pits for catching fish

– Pits in the gully

– Guttering in chambers

– Boundary or compound walls

– Uncovered stairwells in Chajja

– Pumps/watchman booth

– Septic tanks


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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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