Property Tax or House Tax in India is a tax charged by the municipal authorities for the upkeep of basic civic services and amenities in the city like roads, sewer system, parks, and other infrastructure facilities like lighting etc., as well as for maintenance of the existing infrastructure. This article explains What is Property Tax, Different ways in which Property Tax is Calculated Annual Rental Value, Capital Value System and Unit Area System,How to Pay Property Tax?
What is Property Tax?
Property tax or house tax is a local tax levied by municipal authorities for maintaining basic civic amenities in your area. This tax is to be paid for upkeep of civic facilities like roads, sewage system, lighting. This is paid by the Owners of the property either annually or semi-annually. Property tax differs across states, cities and even within zones of the same city. Property Tax is the principal source of revenue in urban local bodies in virtually every part of the world. Mumbai collects around Rs 10,000 crore. Bengaluru collected only Rs 2,000(1,857 crore as on Mar 20 2015-16) as revenue hence in 2016-17 it increased the property taxes by 35%.
Property tax and Income Tax from house property
Property tax is different Income Tax payable on income from house property under the Income Tax Act.These are two different forms of taxation.
- Property Tax is levied by the local body like Panchayat/Municipality/Municipal Corporation while the Income Tax is levied by the Central Government.
- The method of computation of amount of tax payable in both the cases is very different.
On which kind of property is property tax levied?
In India, property tax is levied on real estate which consists of buildings or land attached to the buildings. Vacant plots of land without any adjoining building are not liable to be taxed under this head. The type of properties that are liable to be taxed under property tax in India.
- Residential house (self-occupied or let out)
- Office Building
- Factory Building
- Godowns
- Flats
- Shops
How to Pay Property Tax?
In most of the states you can property taxes online. There are offline methods too, like paying at the municipal office, or at select banks as identified by your municipal authority. Late payments towards property tax can attract a fine, generally equivalent to a certain percentage of the amount due. This interest varies from state to state. Any delay in payment can attract a penalty of 1-2% per month.
Table of Contents
How is Property Tax Calculated?
There are three main ways in which Property Tax can be calculated given below.
- Annual Rental Value or Rate-able Value or ARV : ARV is a system in which the gross annual rent of the property is fixed by the municipal body and taxes would be levied based on the estimated value. Chennai and Hyderabad follow the Annual Rental System.
- Capital Value System or CVS : CVS is where the market value of the property would be used to estimate the taxes to be paid. Generally, this market value is fixed by the stamp duty department of the area.
- Unit Area System or UAS: In UAS system property taxes are levied on the per unit price of carpet area of the property. Cities such as New Delhi,Bangalore follow this system. Generally, you need to ascertain the value of property fixed for your zone and multiply it with the carpet area of your house.
Property Taxation in Indian Cities: A Comparison of Delhi and Bangalore (pdf format) is an interesting read.
Annual Rental Value of Calculating Property Tax
Annual Rental Value or Rate-able Value of a property is the gross annual rent at which the land or building might reasonably be expected to be let-out from year to year. for non-rented properties, the rental value is to be estimated on the basis of rents prevailing for similar properties in the same locality.The rateable value may depend on: Size of the property Location Proximity of the property to certain landmarks, locality Condition of the premises, amenities provided.
A city is divided into wards and the basic annual rental values as well as the applicable property tax rates are decided by the Municipal Authority for each ward. Rates of property tax will also depend upon the usage i.e., residential or commercial or industrial and whether it is owner-occupied or leased.
For example For Calculating Property Tax in Chennai is the first thing to do is to arrive at the annual value of the property. This can be done by calculating the monthly rental value.
- Monthly rental value = Plinth Area x Basic Rate per sq ft
- Annual rental value = Monthly rental value x 12 – 10%.
Example:
| Plinth Area x Basic Rate per sq.ft. (say 100 sq.ft. x Re.1.00) | Monthly rental value = Rs.100 per month. |
| Annual rental value = Rs 100 x (12 months) – 10% for land. Annual value for building only | Rs.1,200 – Rs.120 = Rs.1,080. |
| Less 10% depreciation for the building (repairs / maintenance) | Rs.108 (which is 10% of Rs.1,080). |
| Depreciated value of the building | Rs.1,080 – Rs.108 = Rs.972. |
| Add 10% of the land value | Rs.120 (which is 10% of Rs.1,200). |
| Annual value for land and building | Rs.972 + Rs.120 = Rs.1,092. |
Capital value-based of Calculating Property Tax
The capital value-based system of collecting property tax levies a percentage of tax on the market value of the property so indirectly depends on the stamp duty ready-reckoner which is revised every year by the government. In Mumbai, in 2009 The Brihanmumbai Municipal Corporation (BMC) changed the property tax calculation from the earlier Rateable Value System (RVS) to the new Capital Value System (CVS). The convenient way to calculate property tax is to make use of the online calculator facilitated by the BMC website. You would require your Property Account No. found on the upper portion of your Property Tax Bill. The formula to calculate it as follows:
Capital value = Market value of property x total carpet area x weight for construction type x weight for age of building.
Property tax = Capital value of property (X) current property tax (X) weight for user category
- Use the Ready Reckoner (RR) to arrive at market value. RR is a compilation of the rates that denote a fair value price for a property set by the state government. The builder may charge a premium over such rates but cannot under sell it. The RR gives the base value and the stamp duty and registration amount payable cannot be lower than these rates. Check the ward / zone in which your property falls.
- Weights for construction type :
- Bungalows & RCC construction : 1
- Other than RCC (semi-permanent / chawls): 0 .60
- Under construction or vacant land : 0.50
- Weights for age of building
- Properties constructed before 1945 : 0.80
- Properties constructed between 1945 and 1985 : 0.90
- Properties constructed after 1985: 1
- Weights for user category
- Hotels and like businesses 4
- Commercial properties (shops, offices) 3
- Industries & factories 2
- Residential & charitable institutions 1
The Unit Area Value of Calculating Property Tax
The Unit Area Value is based on the expected returns from the property depending on the location and usage of the property,calculated by fixing a price for per unit value of the area(carpet/built up area). Since the unit of calculation is based on per square foot per month (UNIT) and for a particular location, street, (AREA) and multiplied by a rate (VALUE), this method of assessment of property is called Unit Area Value method. In New Delhi, Bangalore, Kolkata, Hyderabad, Patna and Ahmedabad property tax is calculated by fixing a price for per unit value of the area. Patna was the first to introduce this system. In New Delhi, the unit-based system of collecting property tax was implemented in 2004.
Properties under Municipal Corporation of Delhi(MCD), are taxed based on factors such as built up area (plinth area), category (depends on location) and property type (commercial, residential, industrial, institutional etc.) . Prior to 2003 were taxed on the basis of annual rent at which properties were expected to be let out . The unit based system was notified in August 2003 and was implemented from April 2004. A unit area value is fixed for eight zones (A to H) of the city per square metre covered space for calculation of the property tax. The zones are classified according to the guidelines given in the Delhi Municipal Corporation Act, and are based on parameters like settlement pattern, access to infrastructure, land prices and purpose for which the land or building is being used.
Annual Value = Covered Area x Base Unit Area Value x Multiplicative Factors.
The multiplicative factors include factors relating to Occupancy, Age , Structure and Use. The covered area was the floor area covered including the thickness of the walls and the verandahs, chajjas, lobbies etc. The base unit area value was set using the norms for different categories of properties A to H .
I have residential flat at Vengurla Municipality.
My property tax Rs.2306 in year 2017-2018.I have given my property on rent in 2018-19.So Municipality charged propert tax is 19000.(Rent per month Rs.4000).Is it acceptable?
Hi,
Anyone if have insight on this question then please clarify. I have an apartment in Bangalore and they go by Unit Area system. May i know how govt charge the property tax based only on carpet/built up area? Why not a common slab. Any particular reason. I assume its basically for revenue generation. Correct me If Iam wrong.
I own a shop from last 3 years and rented it out yet. Do i pay property?
Thanks
Yes, it comes under Income from House property.
You, need to pay property tax on it.
You also need to declare the rent as Income from House property, if you are filing your ITR
Dear Sir,
I am a senior citizen allotted one 30×40 size plot by ITI Employees housing co operative society in 1996 @ Yellukunte near H S R L/O Bangalore.I intend to pay property tax to BBMP.Can any body give me the property tax calculation details for vacant site.
Thanks
manjunatha
Thanks for sharing this article.
a land purchased in a village[now city] in old travancore state in 1960 by late my uncle for rs 4500/-it was sold by his son [now 70yrs old] last year who is rtd. from his pvt co .in mumbai and stays with his son at oldage. the sold out price[sold 6 months before] is 23 lakhs.is invested in bank.by him in f.d.&other savings.let know how to calculate capital gain tax,whether to pay ,how long years etc.pl.reply.
i am aged 67.i get a epfo pension of rs,582 per month after my retirement from pvt co.i am living in rented house as i have no house of my own rent paid by my sons.we were having an old house purchased by my father in 1959 in our native land in tamil nadu owned by our late parents.me&my brothers sold our house last year,i got my share &put it in fixed deposit in nationalised bank.i may get monthly interest of 15000/=rupees per month for my expenses from bank out of my investments.i have no other income.let me know whether i have to pay property tax&income for the amount i got of the sold parental house?your reply is awaited to my mail.thanks.
Sir Property Tax is paid when you are the house owner.
After selling the house you don’t need to pay, it is the responsibility of the new owner.
As you have sold the house, you need to pay Capital Gains.
Please go through our article How to Calculate Capital gain on Sale of House? for more details.
I live in a city Council(नगरपरीषद) Area near Pune, here Property tax in my 27 year old fully residential (all 1bhk flats, area 545 sq ft) building fr resident is around 1000-1100 Rs., bt if d same property is rented, Property tax jumps to 19500 Rs. , Is dis Normal..??
Does all other municipalities have the same tax structure fr rened n non rented Properties..??
Thanks for the info & it gives very good understanding of different Property Tax systems prevalent in respective states.
Also, if a Flat/Unit is registered in October 2017 , is it required to pay tax for Fy 18-19 or pro rata only for 5 months.
And how does the penalty for Property tax work?
residential properties in Pune follows which type of taxing system ARV or CVS or UAS?
@Sachin Yewale- How much is the Property Tax fr residential Rented n Non Rented Flats in Pune..??
Pune Municipal Corporation offers an online calculator for you to self-assess your property tax. You will have to enter the following details:
Location
Area
Usage
Type
Total plinth area
Construction year
usage: The alphabet here represents the property type (P= Peth, O=Occupier and F=Flat)
I don’t know about the types of taxes in detail, but from this post I learned about all the details of property tax in India. So, thank you for this kind of information. I hope you will post more details in your next post as soon as possible.
Thanks for kind words.
I want to built new home.my plot sq.ft 1230.how much i pay tax to get approval.am in vellore dist
The builder requires to have the approval or sanctions from the concerned authority for the construction of a building. The building constructed without sanctions or deviated more than 5 per cent from approved plan levies penalty and authorities has right to demolish the building without any prior notice.Following include the list of approvals or sanctions required by builder for engaging in any construction activity.
You should check in your area what approvals are required.
You can refer to Tamil Naidu guidelines for approvals here.
Building Plan: A builder should submit building plan before starting the construction activities. Building plans are a graphical representation of what a building will look like after construction. Building plan ensures that building complies with building laws. Once the building plan is approved, the builder should commence construction work within two years and there should be no deviation from the sanctioned plan.
Layout approval: The builder has to get approval of layout plan from concerned authorities before starting construction of residential or commercial building. Constructing building in unapproved layout will not be given permission to be occupied or such layout plots will be treated as unlawful and exemplary penalties will be levied as per Municipal Laws. Land which is sub-divided into plots without permission from competent authority is considered illegal or unapproved layout. No facilities such as roads, drainage, street lighting will be extended in such areas.
Basic amenities: The builder should get approval from concerned authorities for electricity, water for potable and non-potable use. The building should comply with building laws for sanction or approval of basic amenities.
No Objection Certificate (NOC): The builder has to get NOC from pollution board on the project. It is essential for the approval for sewer or water supply. It is also important to get NOC from the neighboring properties to prove that builder is not encroaching any neighborhood property. Builder has to get NOC from municipality or respective authority for digging bore well. Digging bore well without NOC or approval will be levied penalty and material used for digging bore wells would be seized. In case of construction of building with lift facility, builder has to get NOC from lift authorities
My office is situated in ghatkopar west, swastik disha corporate park, 506, and the carpet area is 222.87 sq ft what will be the amount i have to pay.
Dear Sir, we are six members in bldg. Society is not registered. Property tax is not paid since last 7yrs. Now we have to pay 2Lac Rs. My flat area 350sqft.Other 1100 and 550sqft.
Can you please guide me how much I have to pay
Which place do you stay in?
If we have rented a property for which rent + amenity will charge. So what will be the Tax by Corporation. Whether it is depend on rent or rent + amenity.
Nice article
Nice article
The system is very much similar here in Bengaluru and this year the rates have gone up. This is quite a valuable post as filling up the form especially online can be quite tricky. Also, the buildings keep moving in different zones that adds to more confusion.
The system is very much similar here in Bengaluru and this year the rates have gone up. This is quite a valuable post as filling up the form especially online can be quite tricky. Also, the buildings keep moving in different zones that adds to more confusion.