Owning a home has become one of the top priorities for individuals since the pandemic. However, many new homebuyers are not aware that they are required to pay a tax on their property. Property tax is imposed and collected from the owner of the property by the concerned municipal authority of the jurisdiction where the property is situated. It is also commonly referred to as municipal or house tax.
In this article, we take a look at everything that new homebuyers should know about property tax filing, according to legal experts.
What is property tax?
Property tax is the annual/semi-annual amount paid by a land/property owner to the local government or the municipal corporation of his area. Property Tax in India is levied on the ownership of any real property, including all tangible real estate property such as houses, office buildings, rented flats etc.
Why is property tax collected?
“In India, the property is mandatorily taxed in proportion to its monetary value which is utilized to upkeep local civic amenities, such as roads, parks and streetlights,” says Ashutosh K. Srivastava, Senior Associate, SKV Law Offices
“Property tax is collected by the municipal corporations primarily for maintenance of the civic amenities that are utilized by the residents themselves. Facilities such as garbage pick-up, routine cleaning of the streets, and maintenance of roads and sewage systems are a few basic amenities that every resident desire in society. Thus, payment of property tax by homebuyers is an indispensable facet for contributing towards the maintenance and availability of civic amenities for the homebuyers,” adds Abhinay Sharma, Managing Partner, ASL Partners.
Who has to pay property tax?
Legal experts say that the liability of paying property tax rests on the owner of the property and not on the occupier.
How property tax is calculated
According to Shrivastava, the formula used for calculating property which is as below:
Property tax = base value x built up area x Age factor x type of building x category of use x floor factor. Furthermore, an assessment of the tax to be paid for the property is primarily carried out on the basis of the location of the property, nature of the property (whether it is residential or commercial), year of construction and type of construction.
Additionally, there is no saving that new homebuyers are entitled to income tax benefits, particularly under sections Section 80C, Section 24 and Section 80EEA of the Income Tax Act.
However, the property tax calculation formula may vary from one state to another and sometimes, within one state as well. “For instance, the Municipal Corporation of Delhi (MCD) computes the property tax by multiplying the annual value and rate of tax. The annual value is determined by a variety of factors such as unit area value, unit area of property, structure, use factor etc. On the other hand, the rate of tax is the quantum pre-decided by the MCD,” says Awasthy.
Check property tax before buying
Before purchasing a property, homebuyers must always assess the property tax that will be levied on a specific property that they intend to purchase.
“Knowing the property tax beforehand will be beneficial rather than struggling to understand the computation at the time of paying the property tax. Significantly, homebuyers must also know the formula applied by the concerned municipal corporation in determining the quantum of property tax for a specific property,” says Awasthy.
Where to file property tax?
You can file property tax before the concerned municipal authority. It can also be done very conveniently filed via online platforms.
Earlier, property tax was required to be paid in the offline format at the concerned offices of municipal corporations. However, now even municipal corporations are encouraging property owners to pay the property tax in an online format, which allows a variety of payment options for the convenience of the taxpayers. Therefore, property tax can be paid by the concerned individuals via the e-portals of the municipal corporations subject to the facility of online payment being provided therein.
